Amendments to Modernize Share Repurchase Disclosures

On May 3, 2023, the Securities and Exchange Commission (SEC) adopted amendments to modernize the disclosure requirements relating to repurchases of an issuer’s equity securities that are registered under the Securities Exchange Act of 1934 (“the Act”). The amendments, effective July 31, 2023, are designed to modernize the disclosure requirements for share repurchases, which are when a company buys back its shares of stock and provides investors with enhanced information to assess the purposes and effects of share repurchases.

Amendment Requirements

Tabular Quarterly or Semi-Annual Disclosure of Repurchase Activity

The amendments require issuers to provide tabular disclosure of their repurchase activity on a quarterly or semi-annual basis, depending on the issuer’s reporting obligations. The tabular disclosure must include the following information:

• The class and number of shares repurchased each day during the quarter or semi-annual period.
• The average price paid for each share repurchased.
• A checkbox indicating whether any directors or officers traded in the issuer’s securities within four business days before or after the public announcement of the repurchase plan or program.
• The amendments also require issuers to disclose the total number of shares repurchased that are intended to qualify for the safe harbor rule in Rule 10b-18¹ and separately the total number of shares repurchased pursuant to a plan that is meant to satisfy the affirmative defense conditions of Rule 10b5-1(c)².

Narrative Revisions to Item 703 of Regulation S-K, Form 20-F and Form N-CSR³

The amendments also make several revisions to the narrative disclosures required by Item 703 of Regulation S-K, Form 20-F, and Form N-CSR. These revisions include the following:

• Issuers must now provide a narrative explanation of the reasons for their repurchases, including the impact of the repurchases on the issuer’s capital structure and financial performance.
• Issuers must now disclose any factors they have considered in determining the amount of shares to repurchase.
• Issuers must now disclose any policies and procedures that they have in place to prevent insider trading in connection with their repurchase programs.

Additional Item Disclosure

The amendments also require issuers to provide additional disclosure about their repurchase programs, including the following:

• The date on which any repurchase plan or program was adopted or terminated.
• The date on which any 10b5-1 trading arrangement was adopted or terminated.
• The aggregate number of shares repurchased under any repurchase plan or program.
• The aggregate amount of money that has been spent on repurchases.

Other Requirements

The amendments also make a number of other changes to the disclosure requirements for share repurchases, including:

• Eliminating the requirement to file monthly repurchase data in an issuer’s periodic reports.
• Expanding the definition of “repurchase” to include certain transactions that were previously not considered repurchases.
• Clarifying the disclosure requirements for repurchases that are made under a plan or program.
• The new share repurchase disclosures must be tagged using Inline XBRL. In addition, the new disclosures will be deemed filed, rather than furnished, with the SEC.

Sources

1. Rule 10b-18 provides a safe harbor from liability under the antifraud provisions of the Securities Exchange Act of 1934 for certain repurchases of equity securities by an issuer. The safe harbor applies if the repurchases are made in accordance with certain conditions, including the following:
   – Manner of purchase condition: requires an issuer to use a single broker or dealer per day to bid for or purchase its common stock;
   – Timing condition: restricts the periods during which an issuer may bid for or purchase its common stock;
   – Price condition: specifies the highest price an issuer may bid or pay for its common stock; and
   – Volume condition: limits the amount of common stock an issuer may repurchase in the market in a single day.
2. Rule 10b5-1(c) provides an affirmative defense to liability under the antifraud provisions of the Act for certain trades in the issuer’s securities by an insider
3. Currently, the Commission adopted Item 703 in 2003 to require disclosure on a quarterly/annual/semi-annual basis (depending on the Company’s reporting obligations) of any purchase made by or on behalf of the issuer or any affiliated purchaser of shares or other units of any class of the issuer’s equity securities registered under Section 12 of the Exchange Act, aggregated on a monthly basis.