On May 3, 2023, the Securities and Exchange Commission (“SEC”) adopted a final rule requiring additional disclosure of issuer share repurchases. These new requirements will apply to the following issuers: domestic companies, foreign private issuers and registered closed-end management investment companies that are exchange traded (which we refer to as “closed-end funds”). The final rule requires quarterly reporting of detailed information, on a day-by-day basis, regarding share repurchases made by or on behalf of the issuer during the quarter as well as narrative disclosure regarding issuer share repurchase programs and policies.[1] These rule changes replace or update current requirements to disclose monthly repurchase data in periodic reports. In a notable change from the SEC's December 2021 proposed rule, the new rules will not require issuers to disclose share repurchases one business day after each repurchase.

The final rule will also require new disclosure, on a quarterly basis, of whether a domestic company adopted or terminated a Rule 10b5-1 trading plan during the quarter. This new requirement comes only several months after the SEC adopted a final rule regarding Rule 10b5-1 plans, which requires similar disclosures regarding the adoption and termination of these plans by directors and officers.

For domestic companies, the new disclosure requirements will be effective for the first fiscal quarter beginning on or after October 1, 2023, while the disclosure requirements for foreign private issuers and closed-end funds will take effect for periods beginning in 2024.

Below we discuss the new disclosure requirements and compliance deadlines in further detail.

On a quarterly basis, domestic companies and foreign private issuers will now be required to disclose additional information about the purchase of any class of their registered equity securities made by or on their behalf or by an affiliated purchaser.[2] As noted above, closed-end funds will be required disclose this information semiannually.

Issuers will disclose the following in tabular format, for each day a transaction occurred during the applicable quarter or period:

• the execution date of the repurchase;
• the class of securities repurchased;
• the total number of shares repurchased (whether or not repurchased under a publicly announced repurchase plan or program);
• the average price paid per share, excluding brokerage commissions and other costs of execution;
• the total number of shares repurchased as part of publicly announced repurchase plans or programs;
• the aggregate maximum number (or approximate dollar value) of shares that may yet be repurchased under publicly announced repurchase plans or programs;
• the total number of shares repurchased on the open market;
• the total number of shares repurchased in reliance on the safe harbor in Rule 10b-18; and
• the total number of shares repurchased under a Rule 10b5-1 trading plan, along with footnote disclosure of the date of adoption or termination of any such Rule 10b5-1 trading plan.

Domestic companies will provide this quarterly tabular disclosure as an exhibit to Form 10-Q and Form 10-K (for any repurchases during the fourth quarter). Foreign private issuers that do not file Form 10-Qs or Form 10-Ks will do so on a new form dedicated to this disclosure, Form F-SR, which will be due 45 days after the end of each fiscal quarter.[3] Closed-end funds will disclose this information in their annual and semi-annual reports on Form N-CSR.

In addition, issuers will be required to mark a check box adjacent to the share repurchase table to indicate whether any directors or officers purchased or sold securities that were the subject of a repurchase plan or program within four business days before or after the announcement of such plan or program or the announcement of an increase to an existing share repurchase plan or program.[4] For domestic companies and closed-end funds, this requirement applies to directors and officers who are subject to Section 16 beneficial ownership reporting rules. For foreign private issuers, this requirement applies to directors and members of senior management required to be identified on Form 20-F. When determining whether a director or officer purchased or sold securities during the four business day window, domestic companies and closed-end funds may generally rely on a review of Section 16 reports filed by the director or officer; foreign private issuers may generally rely on written representations from directors and senior management.[5]

The final rule requires this information to be tagged in a machine readable format using Inline XBRL.

2. Narrative Disclosure Regarding Issuer Repurchase Programs and Policies

The final rule also amends Item 703 of Regulation S-K to require additional disclosure regarding a domestic company’s share repurchase programs and policies in its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, with corresponding changes to Form 20-F for foreign private issuers and Form N-CSR for closed-end funds. These disclosures will supplement the new tabular repurchase disclosures described above. Issuers must disclose the following:

• the objective or rationale for each issuer share repurchase plan or program and the process or criteria used to determine the repurchase amounts;
• the number of shares repurchased other than through a publicly announced plan or program, and if so, the nature of the transaction;
• for publicly announced repurchase plans or programs, (i) the date each plan or program was announced, (ii) the dollar amount approved, (iii) the expiration date (if any) of each plan or program, (iv) each plan or program that has expired during the period covered by the repurchase table, and (v) 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; and
• any policies and procedures relating to purchases and sales of the issuer’s securities by its directors and officers during a repurchase program, including any restrictions on such transactions.

3. Additional Disclosure About 10b5-1 Plans

The final rule adopted new Item 408(d) of Regulation S-K, which requires domestic companies to disclose, in their Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, whether, during the most recent quarter, they adopted or terminated a contract, instruction, or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). Domestic companies will also be required to provide a description of the material terms of the contract, instruction, or written plan, such as:

• the date on which the company adopted or terminated the Rule 10b5-1 trading plan;
• the duration of the Rule 10b5-1 trading plan; and
• the aggregate number of securities to be purchased or sold pursuant to the Rule 10b5-1 trading plan.

Under new Item 408(d), domestic companies will not be required to disclose the price or price range at which the party executing the respective trading arrangement is authorized to trade, consistent with new requirements that apply to Rule 10b5-1 plans adopted by officers and directors.

The disclosures called for by Item 408(d) regarding issuer 10b5-1 trading plans may be included in the disclosures regarding issuer repurchase programs required by Item 703, in which case a cross reference to such disclosure will satisfy the requirements of Item 408(d).

4. Compliance Timeline

The timeline for compliance with the new share repurchase and other disclosure requirements is as follows:

• Domestic Companies. The new disclosure requirements are effective for the first fiscal quarter beginning on or after October 1, 2023. Accordingly, for companies with calendar year end reporting periods, the new disclosures will first be included in the fiscal year 2023 Form 10-K filed in 2024 (with tabular disclosures covering any repurchases in the fourth quarter of 2023).
• Foreign Private Issuers. New Form F-SR is required for the first full fiscal quarter that begins on or after April 1, 2024, meaning that for foreign private issuers with calendar year end reporting periods that file Annual Reports on Form 20-F, tabular disclosure will first be included in a Form F-SR for the second quarter of 2024. Form 20-F narrative disclosures will be required starting with the first Form 20-F filed after the foreign private issuer’s first Form F-SR has been filed, meaning that for foreign private issuers with calendar year end reporting periods, narrative disclosure will be first included in the Form 20-F filed in 2025 for the 2024 fiscal year.
• Closed-End Funds. Closed-end funds will be required to comply with the new disclosures beginning with a Form N-CSR that covers the first six-month period beginning on or after January 1, 2024.

If you have any questions concerning the material discussed in this client alert, please contact the members of our Securities and Capital Markets practice.