The SEC has adopted final amendments requiring disclosures related to issuers’ share repurchases. The amendments will require domestic issuers to:
- Disclose daily repurchase activity quarterly;
- Check a box indicating if certain directors or officers traded in the relevant securities within four business days before or after the public announcement of an issuer’s repurchase plan or program;
- Provide narrative disclosure about the issuer’s repurchase programs and practices in its periodic reports; and
- Provide quarterly disclosure in an issuer’s periodic reports on Forms 10-K and 10-Q related to an issuer’s adoption and termination of 10b5-1 trading arrangements.
Disclosure of Share Repurchases
The final amendments require corporate issuers that file on domestic forms to disclose the total repurchases made each day for the quarter in an exhibit to their Form 10-Q and Form 10-K (for the fourth fiscal quarter). The final amendments also:
- Require the daily repurchase data to be filed instead of furnished;
- Eliminate the requirement in current Item 703(a) of Regulation S-K that issuers disclose their monthly quantitative repurchase data in their periodic reports as the information will be included in an exhibit;
- Require disclosure of purchases that were “intended to qualify for” the Rule 10b-18 safe harbor; and
- Require issuers to disclose, in tabular form, the number of shares purchased daily in reliance on Rule 10b-18 or intended to qualify for the affirmative defense provisions of Rule 10b5-1(c).
Narrative Revisions to Item 703 of Regulation S-K
The final amendments require an issuer to disclose:
- The objectives or rationales for each repurchase plan or program and process or criteria used to determine the amount of repurchases;
- Any policies and procedures relating to purchases and sales of its securities by its officers and directors during a repurchase program, including any restriction on such transactions; and
- Whether any of its directors and officers subject to the reporting requirements under Exchange Act Section 16(a) purchased or sold shares or other units of the class of the issuer’s equity securities that are registered pursuant to section 12 of the Exchange Act and subject of a publicly announced repurchase plan or program within four business days before or after the issuer’s announcement of such repurchase plan or program or the announcement of an increase of an existing share repurchase plan or program by checking a box before the tabular disclosure of issuer purchases of equity securities.
Additionally, the final amendments require disclosure of the number of shares (or units) purchased other than through a publicly announced plan or program, and the nature of the transaction (e.g., whether the purchases were made in open-market transactions, tender offers, in satisfaction of the issuer’s obligations upon exercise of outstanding put options issued by the issuer, or other transactions), and certain disclosures for publicly announced repurchase plans or programs, including:
- The date each plan or program was announced;
- The dollar amount (or share or unit amount) approved;
- The expiration date (if any) of each plan or program;
- Each plan or program that has expired during the period covered by the table; and
- Each plan or program the issuer has determined to terminate prior to expiration, or under which the issuer does not intend to make further purchases.
New Item 408(d)
New Item 408(d) will require an issuer to disclose whether, during its most recently completed fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report), the issuer adopted or terminated a contract, instruction, or written plan to purchase or sell its securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). Issuers are also required to provide a description of the material terms of the contract, instruction, or written plan (other than terms with respect to the price at which the party executing the respective trading arrangement is authorized to trade), such as:
- The date on which the registrant adopted or terminated the Rule 10b5-1 trading arrangement;
- The duration of the Rule 10b5-1 trading arrangement; and
- The aggregate number of securities to be purchased or sold pursuant to the Rule 10b5-1 trading arrangement.
New Item 408(d) does not require disclosure of the price at which the party executing the trading arrangement is authorized to trade.
Although there may be some overlap in the disclosure provided pursuant to new Item 408(d) and the disclosure provided pursuant to the amendment to Item 703 of Regulation S-K about an issuer’s Rule 10b5-1(c) trading arrangements adopted during the prior fiscal quarter, new Item 408(d) is intended to complement the new Item 703 disclosure. The disclosure requirement in Item 703 will be triggered only if an issuer had conducted a share repurchase in the prior fiscal quarter. In contrast, Item 408(d) will require disclosure if a Rule 10b5-1 plan was adopted or terminated, regardless of whether a share repurchase transaction pursuant to that plan actually occurred during the prior fiscal quarter that is covered in the Form 10-Q or Form 10-K (for the issuer’s fourth fiscal quarter). To prevent potential duplicative disclosures, the SEC included a note to Item 408(d)(1), which states that, if the disclosure provided pursuant to Item 703 contains disclosure that would satisfy the requirements of Item 408(d)(1), a cross-reference to that disclosure will satisfy the Item 408(d)(1) requirements.
Structured Data Requirement
The final amendments require issuers to tag the information disclosed pursuant to Items 601 and 703 of Regulation S-K in a structured, machine-readable data language in accordance with Rule 405 of Regulation S-T and the EDGAR Filer Manual. The final amendments require detail tagging of the quantitative amounts disclosed within the required tabular disclosures and block text tagging and detail tagging of required narrative and quantitative information.
Domestic issuers will be required to comply with the new disclosure and tagging requirements in their Exchange Act periodic reports on Forms 10-Q and 10-K (for their fourth fiscal quarter) beginning with the first filing that covers the first full fiscal quarter that begins on or after October 1, 2023.