SEC adopts new rules for share buyback disclosures

On May 3, 2023, the U.S. Securities and Exchange Commission (SEC) adopted new rules governing the disclosure requirements regarding repurchases of an issuer’s equity securities, commonly referred to as share “buyback” or repurchase programs¹.

What you need to know

• The new SEC share repurchase disclosure requirements will affect all issuers that have securities listed on a U.S. national securities exchange or otherwise have a class of equity securities registered under Section 12 of the U.S. Securities Exchange Act of 1934, as amended (Exchange Act), but will not be applicable for Canadian issuers reporting under the multijurisdictional disclosure system (MJDS)².
• Non-MJDS foreign private issuers (FPIs) will be required to disclose the daily quantitative share repurchase information quarterly on a new Form F-SR beginning with the first full fiscal quarter commencing on or after April 1, 2024, and will be required to provide narrative disclosures regarding share buyback programs starting in the first Form 20-F filed after their first Form F-SR has been filed.
• Non-FPI issuers that report with the SEC as U.S. domestic companies will be required to include the quantitative data as an exhibit to, and provide the narrative disclosure in, their Forms 10-K and 10-Q for the first full fiscal quarter that begins on or after October 1, 2023.
• The final rules will become effective 60 days after publication in the Federal Register³.

Quarterly reporting of daily share repurchase data

The final rules require non-MJDS issuers to prepare and file, on a quarterly basis, a table of daily quantitative repurchase activity⁴ during the quarter in respect of equity securities that are U.S.-listed or otherwise registered under Section 12 of the Exchange Act. For non-MJDS issuers filing on FPI forms, the tabular disclosure is required to be filed on new Form F-SR, which will be due 45 days after the end of each fiscal quarter that begins on or after April 1, 2024⁵. For non-FPI issuers filing on U.S. domestic forms, this tabular disclosure is required to be included as an exhibit to Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K for the first full fiscal quarter that begins on or after October 1, 2023⁶.

Specifically, the new rules will require quarterly tabular disclosure of the following daily share repurchase information:

• the date on which any purchase of securities was executed;
• the class of securities repurchased;
• total number of securities purchased, whether or not purchased as part of a publicly announced share buyback plan;
• average price paid per security (exclusive of broker/transaction fees)⁷;
• total number of securities purchased as part of a publicly announced share buyback plan;
• aggregate maximum number of shares (or approximate dollar value) that may yet be purchased under publicly announced share buyback plans;
• total number of securities repurchased in the open market outside of publicly announced share buyback plans (not including tender offers, exercises of put options or similar transactions);
• total number of securities purchased in transactions that are intended to qualify for the safe harbor in Rule 10b-18⁸; and
• total number of securities purchased pursuant to a plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)⁹, together with footnote disclosure regarding the date of adoption and/or termination of such plan(s).

The foregoing daily quantitative repurchase data in the above-mentioned tabular disclosure is required to be tagged using Inline XBRL, and will be treated as “filed” rather than “furnished” with the SEC, so that the information will be subject to liability for false or misleading statements under Section 18 of the Exchange Act and will also be incorporated by reference into registration statements, prospectuses or other filings for public offerings under the U.S. Securities Act of 1933.

Checkbox requirement for director and officer transactions

The final rules will also require non-MJDS issuers include a checkbox above the tabular disclosures included in Form F-SR or as an exhibit to Form 10-K and 10-Q, as applicable, to indicate whether any of their directors or executive officers purchased or sold shares of the class of equity securities that is the subject of a share repurchase program within four business days before or after the announcement of such share repurchase program, or the announcement of an increase to an existing share repurchase program.

For FPIs, the checkbox requirement applies to directors and any officers who would be designated as “senior management” on Form 20-F¹⁰. For non-FPI issuers, the checkbox requirement applies to all directors and executive officers who are required to file insider transaction reports under Section 16(a) of the Exchange Act (i.e., Forms 3, 4 and 5).  FPIs will be permitted to rely on written representations of directors or executive officers regarding whether or not to check the box to report whether they transacted in the issuer’s equity securities within four business days of the announcement of new or increased share repurchase programs. Non-FPI issuers reporting on U.S. domestic forms will be permitted to rely on Section 16(a) filings, or written certifications that no such filings are required, in determining whether or not to check the box.

Share buyback disclosure requirements in periodic reports

Periodic narrative disclosures of issuer share buyback plans (Non-MJDS reporting issuers only)

The adopted amendments will eliminate the current requirement to disclose share buyback data on an aggregated monthly basis in Annual Reports on Form 20-F and Form 10-K and in Quarterly Reports on Form 10-Q (as noted above, issuers will instead be required to disclose daily share repurchases, on a quarterly basis, on either Form F-SR or as an exhibit to Forms 10-K and 10-Q, as applicable). Instead, the new rules add the following required narrative disclosures in periodic reports on Forms 20-F, 10-K and 10-Q:

• the objectives or rationales for each share repurchase program and process or criteria used to determine the amount of repurchases; and
• any policies and procedures relating to purchases and sales of its securities by its directors and officers during a share repurchase program, including any restriction on such transactions.

The new rules retain the existing requirements in Forms 20-F, 10-K and 10-Q to disclose:

• the number of securities purchased other than through a publicly announced share repurchase program during the period covered by the report;
• the nature of the transactions (e.g., whether the purchases of securities 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 types of transactions); and
• certain disclosures related to publicly announced share repurchase plans or programs, including (1) the date each plan or program was announced; (2) the dollar amount (or number of securities) approved; (3) the expiration date of the plan or program; and (4) identification of plans or programs that (A) have expired during the period covered by the report or (B) the issuer has determined to terminate prior to expiration, or under which the issuer no longer intends to make future purchases.

Reporting of Issuer 10b5-1 Trading Plans (U.S. domestic reporting issuers only)

In addition, the SEC has adopted new Item 408(d) of Regulation S-K, which requires quarterly disclosure in periodic reports on Forms 10-Q and 10-K about the issuer’s adoption and termination of Rule 10b5-1 trading arrangements. Issuers reporting on these forms will be required to disclose the material terms of the 10b5-1 plan, including the date of adoption, the duration of the plan and the aggregate number of securities subject to the plan (but may omit discussion of pricing terms). This new disclosure requirement aligns with the earlier new SEC disclosure rule regarding disclosure of the adoption and termination of 10b5-1 trading plans by directors and officers, as discussed in our December 2022 bulletin.

Comparison to Canadian share buyback disclosure requirements

The new SEC rules on share buyback disclosures are more extensive and detailed than Canadian requirements, and more granular disclosure will be required for non-MJDS FPI issuers subject to the new rules. Canadian reporting issuers with normal course issuer bids (NCIBs) will also remain subject to Canadian disclosure requirements relating to their NCIB activity, which are summarized below¹¹.

• Issuers must include a summary of the material provisions of their NCIB in their next annual report, annual information circular, quarterly report or other document mailed to shareholders.
• Issuers must report purchases under their NCIB to their Canadian stock exchange within ten days of the end of each month in which they make purchases, whether the securities were purchased through the exchange or otherwise. The report must include (i) the date of the purchases, (ii) the number of securities purchased, and (iii) the volume weighted average price paid. These filings are not made public.
• Regular insider reporting requirements do not apply to purchases under NCIBs. Instead, issuers must file an insider report within 10 days of the end of each month disclosing each acquisition under the NCIB in that month. Insider reports must include (i) the date of each purchase, (ii) the number of securities purchased, and (iii) the price per security paid for each acquisition of securities under the NCIB.
• Canadian MD&A requirements require a discussion of the issuer’s liquidity and capital resources. If share repurchases rise to the level of materiality, disclosure of the number of shares purchased and the aggregate price of such purchases should be included in an issuer’s quarterly and annual reports. Quarterly and annual reports should also disclose the number of shares issued and outstanding as of the last practicable date prior to filing the report.

Canadian securities regulators have not published any proposals for enhanced disclosure comparable to the new SEC rules.