Defining Issues | December 2022

Insight

SEC proposes share repurchase disclosure rules

Proposals would require more timely reporting of share repurchases and expand quarterly and annual filing disclosures.

The proposed rules would require an issuer to furnish certain information to the SEC on newly established Form SR within one business day of share repurchase transactions, and enhance periodic disclosure requirements of share repurchases in periodic reports filed with the SEC (Forms 10-K, 10-Q, 20-F, 40-F or N-CSR).

December 2022 update: The SEC has reopened the comment period on this proposal to allow commenters to consider the impact of a new excise tax on repurchases.

Applicability

  • Public companies that file periodic reports on Form 10-K, 10-Q, 20-F, 40-F or N-CSR

Relevant dates

  • April 1, 2022 - original proposal comment period ended
  • In October 2022, the SEC reopened the comment period for this proposal due to a technical error. This comment period ended on November 1, 2022.
  • On December 7, 2022, the SEC again reopened the comment period, ending 30 days after publication in the Federal Register. 

Key Impacts

December 2022 update: The Inflation Reduction Act of 2022, imposing a new excise tax on the fair value of any stock repurchased during the year, was enacted after the public comment period for proposed amendments closed.

As a result, in December 2022, the SEC staff prepared a memorandum discussing the potential economic effects of the new excise tax for consideration by commenters in the evaluation of the proposed amendments.

Summary of the proposal

The SEC issued a Fact Sheet summarizing the key provision of the proposed rules.

The proposed rules would establish a new Form SR, which an issuer would be required to furnish within one business day after execution of any share repurchase transaction.

The Form SR would be required to include the following information in tabular form:

  • Date of the repurchase.
  • Specific information about the repurchase transaction, including the number and class of shares and price paid, amongst other information.
  • Information including whether the repurchase was made pursuant to a publicly announced plan, made on the open market and/or purchased in reliance on certain safe harbor provisions in the Exchange Act. 

The proposed rules would also revise Item 703 of Regulation S-K (with corresponding changes to Form 20-F and Form N-CSR) to enhance and expand disclosure requirements related to an issuer’s share repurchases in its periodic filings (e.g. Forms 10-K and 10-Q).  

The following disclosure requirements would be added under the proposed rules, and would be required to follow the Inline XBRL tagging requirements in an issuer’s filings:

  • The objective or rationale for the issuer’s share repurchases and process or criteria used to determine the amount of repurchases.
  • Any policies and procedures relating to purchases and sales of the issuer’s securities by its officers and directors during a repurchase program, including any restriction on such transactions.
  • Whether the issuer made its repurchase pursuant to a plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c), and if so, the date the plan was adopted or terminated.
  • Whether purchases were made in reliance on the Rule 10b-18 non-exclusive safe harbor.
  • Whether any officer or director of the issuer purchased or sold shares of the class of the issuer’s equity securities that is the subject of an issuer share repurchase plan or program within 10 business days before or after the announcement of an issuer purchase plan or program.

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