SEC Adopts New Share Repurchase Disclosure Rules

On May 3, 2023, the Securities and Exchange Commission (SEC) adopted final rules requiring increased quantitative data and expanded narrative disclosure regarding share repurchases by an issuer.

Overview of New Disclosures

In summary, the new requirements include:

• Quarterly Disclosure of Daily Quantitative Repurchase Data: Domestic issuers[1] must disclose, on a quarterly basis, daily quantitative share repurchase data regarding any class of the company’s publicly traded equity securities repurchased by or on behalf of the company or any “affiliated purchaser.”[2] The final rules relax the stringent requirements contained in the SEC’s 2021 proposed rules by eliminating the proposed Form SR, which would have required daily reporting of share repurchases and would have been deemed furnished to the SEC. The new disclosure must be presented in an exhibit to the company’s Forms 10-Q and 10-K, as applicable, which is deemed filed with the SEC as opposed to furnished. The information must be presented in the following tabular form for each day on which repurchases were executed:

• Check the Box: Above this new table, issuers must include a checkbox indicating whether any Section 16 officers or directors purchased or sold any of the issuer’s equity securities subject to a share repurchase plan or program if the trade occurs within four business days before or after the announcement of the repurchase plan or an increase of an existing share repurchase plan or program.
• Expanded Narrative Disclosure: Under revised Item 703 of Regulation S-K, the monthly repurchase disclosure table has been eliminated, and issuers must now provide certain new narrative detail about their share repurchases listed in the new table, as well as any related share repurchase plans or programs, including the objectives and rationales for each repurchase plan or program, the criteria used to determine the amount of repurchases, information regarding repurchases made other than pursuant to a repurchase plan or program, and information about any policies and procedures relating to the purchases and sales of the company’s securities during a repurchase program by its officers and directors, including whether there are any restrictions on such transactions. In addition, issuers will still have to disclose information currently required to be disclosed in footnotes to the eliminated monthly repurchase table for publicly announced repurchase plans or programs in the new narrative disclosure.
• Rule 10b-5 Quarterly Disclosure: Pursuant to new Item 408(d) of Regulation S-K, issuers must disclose whether any Rule 10b-5 trading arrangement[3] was adopted, modified, or terminated by the issuer during the relevant quarter and describe the material terms, other than terms with respect to price, of such trading arrangement, including the date adopted or terminated, the duration, and the aggregate number of securities to be repurchased. These new disclosure requirements are similar to the disclosure requirements regarding the adoption, modification, and termination of trading plans by officers and directors adopted by the SEC in December 2021 and discussed in an earlier Mintz advisory.
• XBRL Tagging: Issuers must tag the new disclosures using Inline XBRL.

Compliance Dates

The new rules will become effective 60 days following publication of the adopting release in the Federal Register.[4] Compliance with the new rules is required by domestic issuers[5] beginning with the first Form 10-Q or 10-K filing that covers the first full fiscal quarter that begins on or after October 1, 2023 (the fourth quarter ended December 31, 2023 and the associated Form 10-K for the year ended December 31, 2023 for calendar-year issuers). It is important to note that the amendments do not provide any disclosure exemptions for emerging growth companies, smaller reporting companies, or non-accelerated filers.

If you have questions about the new rules, please contact the authors of this alert or your regular counsel at Mintz.

Endnotes

[2] “Affiliated purchaser” is defined in Rule 10b-18(a)(3) as (i) a person acting, directly or indirectly, in concert with the issuer for the purpose of acquiring the issuer's securities; or (ii) an affiliate who, directly or indirectly, controls the issuer's purchases of such securities, whose purchases are controlled by the issuer, or whose purchases are under common control with those of the issuer; provided, however, that “affiliated purchaser” shall not include a broker, dealer, or other person solely by reason of such broker, dealer, or other person effecting Rule 10b–18 purchases on behalf of the issuer or for its account, and shall not include an officer or director of the issuer solely by reason of that officer or director's participation in the decision to authorize Rule 10b–18 purchases by or on behalf of the issuer.