Share Repurchase Disclosure Modernization

A Small Entity Compliance Guide[1]

Introduction

On May 3, 2023, the Securities and Exchange Commission (the “Commission”) adopted amendments to Regulation S-K, Regulation S-T, Form 10-K, Form 10-Q, Form 20-F, and Form N-CSR. The Commission also voted to adopt new Rule 13a-21 under Securities Exchange Act of 1934 (the “Exchange Act”) and new Exchange Act Form F-SR. The amendments modernize and improve the information investors receive about repurchases of an issuer’s equity securities, enabling them to better assess the efficiency of, and motives behind, an issuer repurchase. Among other things, the amendments require information regarding the structure of an issuer’s repurchase program and its daily share repurchases. Finally, the amendments add new quarterly disclosure in certain periodic reports related to an issuer’s adoption and termination of certain trading arrangements.

Who is affected by the amendments?

The amendments, other than those related to the quarterly disclosure of an issuer’s adoption or termination of certain trading arrangements, affect domestic corporate issuers and foreign private issuers (“FPIs”)[2] with classes of securities registered under the Exchange Act[3] regarding any purchase made by or on behalf of the issuer or any affiliated purchaser^[4] of shares or other units of any class of the issuer’s equity securities registered under the Exchange Act. These amendments also apply to registered closed-end management investment companies that are exchange traded (“Listed Closed-End Funds”), as well as business development companies (“BDCs”).

The amendments requiring an issuer to disclose on a quarterly basis its adoption and termination of certain trading arrangements apply to all issuers that file annual reports on Form 10-K and quarterly reports on Form 10-Q, regardless of whether they have a class of securities registered under the Exchange Act.

What changes were made by the amendments?

Changes to Share Repurchase Disclosure

The amendments require tabular disclosure of an issuer’s aggregate daily quantitative repurchase activity to be disclosed on a quarterly or semi-annual basis, depending on the type of issuer. Specifically, the final amendments require:

• Corporate issuers that file periodic reports on Forms 10-Q and 10-K to disclose daily quantitative repurchase data at the end of every quarter in an exhibit to their Form 10-Q and Form 10-K (for an issuer’s fourth fiscal quarter);
• Listed Closed-End Funds to disclose daily quantitative repurchase data in their annual and semi-annual reports on Form N-CSR; and
• FPIs that file annual reports on Form 20-F to disclose daily quantitative repurchase data at the end of every quarter in new Form F-SR, which must be filed within 45 days after the end of an FPI’s fiscal quarter.

The amendments also require tabular disclosure of the total number of shares purchased daily that are intended to qualify for the Exchange Act Rule 10b-18 safe harbor, as well as the total number of shares purchased daily pursuant to a plan that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c). Additionally, the amendments require issuers to disclose, by footnote to the daily repurchase table, the date any plan that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) for the shares was adopted or terminated.

Further, the amendments require issuers to include a checkbox above the tabular repurchase disclosures that will indicate whether officers or directors reporting pursuant to section 16(a) of the Exchange Act or, for FPIs, any director or member of senior management who would be identified pursuant to Item 1 of Form 20-F, purchased or sold shares of the issuer that are the subject of a share repurchase plan or program before or after the announcement of the issuer’s repurchase plan or program or the announcement of an increase of an existing share repurchase plan or program. Issuers are required to check the box if a purchase or sale (or increase) occurs within four business days before or after the repurchase announcement.

The amendments to Item 703 of Regulation S-K, Form 20-F, and Form N-CSR require disclosure of:

• The objectives or rationales for each repurchase plan or program and the process or criteria used to determine the amount of repurchases; and
• 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.

In addition, Item 703(a) of Regulation S-K, Item 16E of Form 20-F, and Item 14 of Form N-CSR were amended to remove the requirement that issuers disclose their monthly quantitative repurchase data in their periodic reports in a table accompanied by certain footnote disclosures. The amendments also move the location of the following disclosures from the footnotes to the main narrative discussion:

• 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.

Disclosures Regarding Rule 10b5-1 Trading Arrangements

The amendments add new Item 408(d) to Regulation S-K to require issuers to disclose whether, during an issuer’s most recently completed fiscal quarter, the issuer adopted or terminated any contract, instruction, or written plan to purchase or sell its securities intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) (“Rule 10b5-1 trading arrangement”). Item 408(d) also requires issuers to provide a description of the material terms of the Rule 10b5-1 trading arrangement (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 issuer 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.

Structured Data Requirements

The amendments also require detail tagging of the required quantitative information and block text tagging of the required narrative information, both in Inline eXtensive Business Reporting language.

Please refer to the adopting release for a complete description of all the amendments.

What are the compliance dates of the amendments?

The amendments are effective July 31, 2023. FPIs that file on the FPI forms will be required to comply with the new disclosure and tagging requirements in new Form F-SR beginning with the Form F-SR that covers the first full fiscal quarter that begins on or after April 1, 2024. The narrative disclosure that relates to the Form F-SR filings, which is required by Item 16E of Form 20-F, and the related tagging requirements will be required starting in the first Form 20-F filed after an FPI’s first Form F-SR has been filed. Listed Closed-End Funds will be required to comply with the new disclosure and tagging requirements in their Exchange Act periodic reports beginning with the Form N-CSR that covers the first six-month period that begins on or after January 1, 2024. All other 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.

For example, the compliance dates for a registrant with a December 31, 2023 fiscal year-end is as follows: (1) Issuers that file periodic reports on Forms 10-Q and 10-K will be required to begin complying with the new disclosure and tagging requirements in their Form 10-K for the fiscal year ending on December 31, 2023 as it relates to repurchases made during the quarter ending December 31, 2023; (2) FPIs that report using Form 20-F will be required to begin filing new Form F-SR for the quarter ending June 30, 2024; and (3) Listed Closed-End Funds will be required to begin complying with the new disclosure and tagging requirements in Form N-CSR for the six-month period ending on June 30, 2024.

Other Resources

The adopting release for these amendments can be found on the Commission’s website at https://www.sec.gov/files/rules/final/2023/34-97424.pdf.

The Commission’s disclosure forms can be accessed on the agency’s website at https://www.sec.gov/forms.

Contacting the SEC

The Commission’s Division of Corporation Finance is happy to assist small companies and others with questions regarding the amendments. You may contact the Division for this purpose at (202) 551-3400 or https://www.sec.gov/forms/corp_fin_interpretive.

Questions on other Commission regulatory matters concerning small companies may be directed to the Division’s Office of Small Business Policy at (202) 551-3460.

The Commission’s Division of Investment Management’s Chief Counsel’s Office is also available to assist small entities and others with questions regarding the rule amendments applicable to BDCs and Listed Closed-End Funds. You may contact the Office for this purpose at 202-551-6825 or IMOCC@sec.gov.