Notice: Amended Share Repurchase Disclosure Requirements – Securities

Memorandum for our capital markets clients

On May 3, 2023, the U.S. Securities and Exchange Commission (the “SEC”) adopted final amendments to the rules and regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) to add disclosure requirements regarding with redemptions of common securities of the issuer. equity securities. Importantly, these changes apply to both domestic registrants and foreign private issuers that file Forms 6-Ks and 20-Fs.

Tabular disclosure

The amendments require tabular publication of the issuer’s daily quantitative activity in the area of ​​share repurchases, either quarterly or, only in the case of listed closed-end funds, semi-annually. The table will include, for each day, the applicable: (i) date of execution, (ii) class of shares, (iii) total number of shares purchased on that date (including but not limited to the total number of shares purchased as part of a publicly announced plan), (iv ) the average price paid per share, (v) the total number of shares purchased as of that date as part of the publicly announced plan, (vi) the total maximum number of shares (or approximate dollar value) that may still be purchased under the publicly announced plan, ( vii) the total number of shares purchased in the open market and (viii) the total number of shares purchased to qualify for the safe harbor set forth in Rule 10b-18, and separately (ix) the total number of shares purchased under a plan that is intended to satisfy the affirmative defense conditions of rule 10b5-1(c).

These disclosures will replace the existing requirements regarding monthly repurchase data required by Regulation SK and Form 20-F. Foreign private issuers will have to publish data in the new F-SR form. Form F-SR must be filed on EDGAR within 45 days after the end of the foreign private issuer’s tax quarter. Domestic issuers will be required to file a tabular disclosure as an exhibit to the issuer’s Form 10-Q or 10-K in an XBRL-marked format.

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Issuers will also be required to disclose whether certain officers and/or directors have purchased or sold shares that are the subject of the issuer’s stock repurchase plan or program within four business days before or after the announcement of that plan or program. For foreign private issuers, this requirement applies to any director or executive officer who would be identified under Item 1 of Form 20-F, regardless of whether that foreign private issuer reports on forms available exclusively to foreign private issuers issuers, or on domestic forms. The amendments allow issuers to rely on Section 16 forms filed by domestic issuers with the SEC or, in the case of foreign private issuers, on written insider statements, provided the reliance is reasonable.

Descriptive repurchase disclosure requirements

The amendments also expand the descriptive disclosure of repurchases in periodic reports and require an issuer to disclose (i) the objectives or reasons for repurchases of its shares and the criteria used to determine the amount of repurchases, (ii) any policies and procedures relating to repurchases and sales of securities securities of the issuer during the repurchase program by its officers and/or directors, including any restrictions on such transactions, (iii) whether any of its directors and/or officers have purchased or sold shares (or other units) of a class of equity securities of the issuer that are registered under § 12 of the Stock Exchange Act and are the subject of a publicly announced buyback plan or program within four working days before or after the issuer’s announcement of the implementation of the buyback plan or program or the increase of the existing plan or program by ticking the box before tabular publication of purchases of equity securities by the issuer and (iv ) of the number of shares repurchased other than through a publicly announced plan or program and the nature of the transaction (e.g. whether repurchases were made in an open market transaction, tender offers to satisfy the issuer’s obligations upon the exercise of outstanding options issued by the issuer or other transactions) and certain disclosures for publicly announced repurchase plans or programs.

As currently required, if an issuer’s repurchase plan or program has been publicly announced, the issuer must disclose (i) the date each plan or program was announced, (ii) the dollar or share amount approved, (iii) the expiration date (if any) . ) each plan or program, (iv) each plan or program that expired during the period shown in the table, and (v) each plan or program that the issuer has decided to terminate before its expiration, or under which the issuer does not intend to make further redemptions.

New section 408(d) of Regulation SK

In December 2021, the SEC adopted amendments to Rule 10b5-1 that require issuers to disclose in their periodic reports whether any officers or directors entered into or terminated business plans under Rule 10b5-1 and provide a description of the material terms of those plans during its most recently completed fiscal year quarter. Section 408(d) will require quarterly disclosure in periodic reports on Forms 10-Q and 10-K of the issuer’s adoption and termination of business arrangements under Rule 10b5-1. Pursuant to Rule 10b5-1, issuers will be required to disclose the date they adopted or terminated a business plan under Rule 10b5-1, the duration of the plan, and the total number of shares to be purchased or sold under the arrangement. . Section 408(d) does not require disclosure of the price at which a party to a trading arrangement is authorized to trade. Issuers will not be required to disclose information about the acceptance or termination of any trading arrangements for the purchase or sale of securities that meet the requirements of a trading arrangement outside of Rule 10b5-1.

Issuers will be required to disclose this information in their quarterly reports on Form 10-Q and Form 10-K in a format marked XBRL.

Compliance dates

Foreign private issuers will be required to comply with the changes on Form F-SR within 45 days after the end of a fiscal quarter (including the last quarter of each year) beginning on or after April 1, 2024. Form 20-F Descriptive repurchase disclosure requirements will be required beginning with the first Form 20-F filed after the foreign private issuer’s first Form F-SR is filed. Domestic issuers will be required to comply with the amendments to Forms 10-Q and 10-K beginning with the first filing that covers the first full fiscal quarter beginning on or after October 1, 2023. While the new disclosure requirements will require additional filings for issuers that use a repurchase plan, the final rules adopted by the SEC are less onerous than originally proposed, particularly in that once adopted, reporting will continue to be quarterly rather than the next business day after buyback as originally proposed .

Issuers should now begin evaluating the expanded share repurchase disclosure requirements and the impact these requirements will have on the company’s recordkeeping practices related to share repurchases and relevant insider transactions. In addition, the board’s rationale and objectives related to share buyback programs should be considered before the compliance deadline, which should be disclosed in the discussion required by the new rules.

Originally published on May 11, 2023

The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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