TheCorporateCounsel.net

Many companies breathed a sigh of relief last year when the SEC’s stock repurchase disclosure rules were vacated by the 5th Circuit. But this Woodruff Sawyer blog provides a reminder that although the burdensome disclosure rules may be gone, when it comes to buybacks, the regulatory heat is still on.

The blog points to the SEC’s 2023 enforcement action against Charter Communications and its 2020 enforcement action against Andeavor LLC targeting alleged internal control shortcomings with respect to buyback programs. In order to avoid the problems that these companies ran into, the blog recommends that companies ensure that the people executing the plan understand the parameters authorized by the board & establish robust strategies for assessing whether the company is in possession of MNPI before entering the market. Here’s an excerpt from the blog’s discussion of this latter recommendation:

In the context of share buybacks, as noted above, the question is not whether one individual has MNPI—it’s about the company. An approach that some companies have implemented is having the company’s general counsel send an email to certain executive officers to confirm that the company is not in possession of MNPI before initiating a share buyback. The CEO, CFO, and treasurer should generally be included in the list of recipients, as well as others depending on the company. It may also be a good idea to consider sending a similar email (or better yet, a call) to the chair or the lead director of the board, as applicable. Lastly, before sending an email like this, it would be a good idea to socialize the purpose of the email and how it’s a critical element of the company’s internal controls and procedures.

The blog says that for recipients other than the CEO, CFO and treasurer, the company shouldn’t provide details beyond what is included in the email – the fact that the CEO & CFO are addressees should be enough to get their attention.

– John Jenkins