SEC Amends Share Repurchase Disclosure Requirements

On May 3, 2023, the SEC adopted amendments (available here) to require additional quarterly disclosures by issuers when repurchasing their shares, including:

• expanded disclosures about share repurchases conducted each quarter, to be broken out by trading day;
• identification by check-box whether trading by certain officers and directors occurred within four days before or after any issuer repurchase plan announcements;
• greater narrative detail about the structure of any issuer repurchase program; and
• disclosure of material details about any issuer Rule 10b5-1 plans adopted or terminated in a quarter.

Domestic issuers will be required to make these disclosures in their Exchange Act periodic reports commencing with the filing covering the first full fiscal quarter that begins on or after October 1, 2023 (i.e., calendar year companies will be required to make these disclosures commencing with their 10-K for the fiscal year ending December 31, 2023).  Foreign private issuers will have an additional six months before they are required to make, on a new Form F-SR, the quarterly share repurchase disclosures and disclosure regarding transactions by directors and officers within four days of any share repurchase plan announcement. Foreign private issuers will be required to include the additional narrative details starting in the first Form 20-F filed after their first Form F-SR has been filed.  MJDS issuers are not subject to these amendments.

Expanded Quarterly Repurchase Disclosures

The amended rules will require expanded disclosures by issuers regarding their repurchases of registered equity securities in any given quarter.  In a welcome departure from the SEC’s initial proposal, issuers will not be required to make such disclosure each day that they conduct repurchases; domestic issuers will instead file a breakdown by day of repurchase information as an exhibit to their periodic report on Form 10-Q or 10-K.[1]  The new requirements will require issuers to disclose, in tabular form and for every day they conducted repurchases in the quarter:

• the class of equity securities purchased;
• the total number of shares (or units) purchased, including all issuer repurchases whether or not made pursuant to publicly announced plans or programs;
• the average price paid per share (or unit);
• the aggregate total number of shares (or units) purchased on the open market;
• the aggregate total number of shares (or units) purchased in reliance on the Rule 10b-18 safe harbor; and
• the aggregate total number of shares (or units) purchased pursuant to a Rule 10b5-1 plan (including, in a footnote to the table, the date such Rule 10b5-1 plan was adopted or terminated).

The data will be required to be tagged using Inline XBRL, and, in a departure from its initial proposal, this information will be considered filed (rather than furnished).

In addition, issuers will be required to disclose, by checking a box, whether any officers or directors required to file reports under Section 16(a) of the Exchange Act purchased or sold the securities that are the subject of the repurchase program within four business days before or after the announcement of the program.

Amendments to Item 703 of Regulation S-K

Under amended Item 703 of Regulation S-K, issuers will also be required to provide, on a quarterly basis, additional narrative disclosures about their repurchase programs regarding:

• the objectives or rationales for their share repurchases and process or criteria used to determine the amount of repurchases;
• any policies and procedures relating to purchases and sales of their securities by their officers and directors during a repurchase program, including any restriction on such transactions;
• whether they made repurchases pursuant to a Rule 10b5-1 plan, and if so, the date that the plan was adopted or terminated; and
• whether repurchases were made in reliance on the Rule 10b-18 non-exclusive safe harbor.

The amendments eliminate the existing requirement to include a monthly repurchase table in each Form 10-Q and 10-K.  Issuers will continue to be required to provide information, in narrative form, regarding the purchase of shares outside of a publicly announced repurchase plan or program (including the number of shares and nature of the transaction – e.g., whether open-market transactions, tender offers, or other transactions), and regarding publicly announced repurchase plans (including the date of announcement, the dollar or share/unit amount approved, the expiration date, which repurchase plans or programs expired or were terminated during the quarter, or under which the issuer does not intend to make any further purchases).

The SEC also adopted amendments to Form 20-F to implement these disclosure requirements for foreign private issuers.

New Item 408(d) of Regulation S-K

The amendments also create a new Section 408(d) of Regulation S-K, which will require issuers to disclose quarterly the material terms of any issuer Rule 10b5-1 plan adopted or terminated in the most recent quarter, including:

• the date of adoption or termination;
• the duration; and
• the aggregate amount of securities to be sold or purchased thereunder.

This disclosure requirement was initially proposed as part of the SEC’s amendments to Rule 10b5-1, but, in response to comments, the SEC instead considered it alongside the share repurchase disclosure amendments. 

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[1]       As noted above, foreign private issuers will be required to make these disclosures quarterly on a new Form F-SR which will be due 45 days after the end of their fiscal quarter.  MJDS issuers are not subject to these disclosure requirements.