SEC Bulletin: Recently Adopted SEC Rules Require New Share Repurchase Disclosures

The SEC postponed the effective date of the new share repurchase disclosure rules. See BDO’s Bulletin BDO Bulletin: SEC Postpones Effective Date Of Share Repurchase Disclosure Rules | BDO for further detail.

What Happened

The SEC’s recently adopted share repurchase disclosure rules will require registrants to report daily repurchase activity quarterly or semi-annually and make other qualitative disclosures regarding their repurchase plans. Many registrants have a short time to prepare for the new disclosures as the rules are effective for the first quarter that begins on or after October 1, 2023.

Background

Issuers may repurchase shares of stock through various means, including open market purchases, tender offers, privately negotiated transactions and accelerated share repurchases. Typically, repurchase plans or programs are disclosed at the time the share repurchases are authorized by the board of directors. Monthly repurchase data is currently reported in an issuer’s periodic reports. On May 3, 2023, the SEC adopted amendments to modernize these share repurchase disclosure requirements and “provide investors with enhanced information to assess the purposes and effects of the repurchases.” The press release is available here and the fact sheet is available here.

Summary and Key Highlights

Issuers will be required to disclose repurchase activity quarterly or semi-annually aggregated daily. Corporate issuers that file on domestic forms will file the required information quarterly in an exhibit to Forms 10-Q and 10-K (for the fourth fiscal quarter). Foreign private issuers not utilizing domestic forms will report on a new Form F-SR, which is due within 45 days after the end of each fiscal quarter. Listed closed-end funds will include the data in annual and semi-annual reports on Form N-CSR.

The required tabular disclosures will include the following for each day:

• The class of shares
• Average price paid per share
• Total number of shares purchased (including the total purchased as part of any publicly announced plans)
• Aggregate maximum number of shares (or approximate dollar value) that may yet be repurchased
• Total number of shares purchased on the open market
• Total number of shares purchased that are intended to qualify for the safe harbor in Rule 10b-18 and separately the total number of shares purchased pursuant to a plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)

If certain officers or directors purchase or sell shares subject to an issuer’s share repurchase plan or program within four business days before or after announcement of such plan, the issuer will be required to include a checkbox preceding the tabular disclosures outlined above.

The amendments require narrative disclosures of repurchases that include:

• The objective or rationale for share repurchases and the process or criteria used to determine the amount of repurchases
• Policies and procedures relating to purchases and sales of the issuer’s securities during a repurchase program by officers and directors (including any restrictions on such transactions)

Additionally, new Item 408(d) of Regulation S-K will require disclosures of an issuer’s adoption and termination of Rule 10b5-1 programs quarterly in Forms 10-K and 10-Q. The existing requirements to disclose monthly repurchase data in periodic reports within Regulation S-K, Form 20-F and Form N-CSR will be eliminated. 

Effective Dates

The SEC postponed the effective date of the new share repurchase disclosure rules. See BDO’s Bulletin BDO Bulletin: SEC Postpones Effective Date Of Share Repurchase Disclosure Rules | BDO for further detail.

• Foreign private issuers that file on foreign forms are required to comply in the new Form F-SR that covers the first full fiscal quarter beginning on or after April 1, 2024. Form 20-F narrative disclosure that relates to the Form F-SR filings will be required starting in the first Form 20-F filed after the first Form F-SR is filed.
• Listed closed-end funds will be required to comply beginning with the Form N-CSR covering the first six-month period that begins on or after January 1, 2024.
• All other issuers will be required to comply on Forms 10-K (for the fourth fiscal quarter) and 10-Q beginning with the first filing that covers the first full fiscal quarter that begins on or after October 1, 2023.