Executive Summary
On May 3, 2023, the U.S. Securities and Exchange Commission (the "SEC") adopted, by a 3-to-2 vote, amendments (the "Amendments")1 to its existing rules (the "Existing Rules") regarding disclosures about purchases of an issuer's equity securities by or on behalf of the issuer or an affiliated purchaser, commonly referred to as "buybacks." The Amendments require quantitative and qualitative disclosure of buybacks on a day-by-day basis but, in a significant change from the SEC's original proposal that would have required next business day reporting, this disclosure will be required on either a quarterly or semi-annual basis, depending on the type of issuer. The amendments also revise and expand the existing periodic disclosure requirements for buybacks.
The Amendments apply to issuers that repurchase securities registered under Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act"), including smaller reporting companies, emerging growth companies, foreign private issuers ("FPIs") and registered closed-end investment management companies that are exchange traded ("Listed Closed-End Funds"). The Amendments require disclosure for all buybacks, without a materiality threshold.
Background
An issuer may undertake repurchases through a number of methods, including through open market purchases, tender offers, privately negotiated repurchases or accelerated share repurchase programs. Currently, SEC filings are not required to, and typically do not, disclose the specific days on which buybacks pursuant to an announced repurchase plan or program were executed. The Amendments revise and expand the buyback disclosure currently required by Item 703 of Regulation S-K, Item 16E of Form 20-F and Item 14 of Form N-CSR by requiring additional information with respect to buybacks, including quantitative and qualitative details of daily trades. According to the adopting release, the SEC believes that the Amendments "will provide investors with enhanced information to assess the purposes and effects of repurchases, including whether those repurchases may have been taken for reasons that may not increase an issuer's value."
The SEC originally proposed share repurchase disclosure amendments on December 15, 2021. The SEC reopened the comment period for this rulemaking twice, once in order to allow more time following a technological error in the SEC's internet comment form that potentially affected comments on a number of SEC proposals, and a second time in connection with an SEC staff report analyzing the potential economic effects of the new excise tax on buybacks contained in the Inflation Reduction Act of 2022.
The following table summarizes key aspects of the Amendments compared to the Existing Rules:
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