Corporate buy‑back plans will be impacted this year both by the adoption of new rules directly addressing such plans, and new rules related to advance stock trading plans that permit trading to continue even when in possession of material, non‑public information.  Many corporate buy‑back plans currently are designed to comply with the safe harbor for such advance trading plans, Rule 10b5‑1, so that the company’s repurchases are not restricted to open trading windows.

This client alert outlines the changes that companies should begin to prepare for as the deadlines for compliance approach. Although a major trade association has filed a lawsuit challenging the new rules, the court will not likely stay the new rules prior to their effectiveness.

New SEC Buy‑Back Rules

The new buy‑back rules adopted by the SEC will become effective for any report filed on or after October 1, 2023.  Calendar year companies must begin to comply for their annual reports on Form 10‑K (or 20‑F for foreign private issuers) filed in 2024 and covering buy‑back activity in the fourth quarter of 2023.  Quarterly, companies will be required to file an exhibit including tabular disclosure of daily quantitative share repurchase information, including the average price and number of shares repurchased each day, as well as disclosure of repurchases made pursuant to Rule 10b5‑1 and 10b‑18 (the limited safe harbor from market manipulation concerns).  Foreign private issuers will provide the disclosure in their annual reports on Form 20‑F and on new Form F‑SR.  New narrative disclosure will also describe the company’s rationales and objectives for engaging in the buy‑back program, as well as any policies or restrictions it places on trading by officers and directors during the period in which the company is repurchasing shares.

New Rules for Advance Trading Plans

The SEC had originally proposed, but did not ultimately adopt, new cooling off period and other requirements that would have applied to the company under amendments to Rule 10b5‑1.  However, in adopting the new buy‑back rules, it added new Item 408(d) of Regulation S‑K that will require quarterly disclosure in periodic reports on Forms 10‑Q and 10‑K about a domestic issuer’s adoption and termination of Rule 10b5‑1 trading arrangement.  Form 20‑F will require a foreign private issuer to disclose information about publicly‑ announced trading plans and terminations of such plans.

What Issuers Should Do Now

We recommend that issuers consider their planned or ongoing stock buy‑back programs with a view to the new required disclosures that will cover periods at the end of the current fiscal year.  Some issuers may consider modifying their current trading plans, but others merely should ensure that their current disclosure procedures and practices are updated to satisfy the new requirements.  For example:

  • given the requirement to disclose the objectives of buy‑back plans, it may be prudent to ensure that relevant minutes or resolutions of the Board of Directors address that subject;
  • given the requirement to disclose policies and procedures related to transactions by officers and directors, should the company’s employee stock trading policies be re‑considered?

In sum, companies should expect the rules to become effective on schedule, and begin to consider the impact of the new disclosure requirements well before the beginning of their last fiscal quarters.

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Photo of Frank Zarb Frank Zarb

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies…

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies, hedge funds and family offices, and market intermediaries and other financial institutions on a wide range of transactional and securities regulatory compliance matters including:

  • Equity investments and dispositions in public and private companies
  • Public company registration, disclosures and preparation of periodic reports
  • Tender offers, equity lines, proxy contests, SPACs, and other highly regulated transactions
  • Regulation M, Regulation SHO, Forms 13F and 13H, insider trading and other trading issues
  • Corporate governance and stock exchange listing standards
  • Federal and state proxy requirements as well as shareholder proposals and communications
  • Regulation of financial intermediaries, including trading of public and private equity, and complex and novel trading structures
  • Advocating with the SEC on behalf of a market intermediary related to back-office processing matters.

Frank’s practice is both domestic and international, beginning with his experience in senior positions with the Securities and Exchange Commission. As a member of the staff of the SEC’s Office of International Corporate Finance, Frank advised U.S. companies seeking to do business in the EU, Asia and the Middle East, as well as companies from those regions doing business in the U.S., or otherwise seeking to comply with the U.S. securities laws.  In the Office of Chief Counsel, he focused on federal proxy rules, and supervised a team of staff members that provided guidance in the course of proxy season.

Prior to joining the Firm, Frank was deputy general counsel/chief securities counsel for Bristol Myers Squibb Co. in a new position required by the SEC. Prior to joining Bristol-Myers, Frank was a corporate partner with Morgan, Lewis & Brockius.

Social Responsibility

Frank is a Trustee of the Gerald R. Ford Presidential Foundation, and he provides significant pro bono assistance to non-profit social service institutions in the Washington, D.C. area.

Photo of Louis Rambo Louis Rambo

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and…

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and shareholder activism. Prior to joining the Firm, Louis served as an attorney in the Division of Corporation Finance with the Securities and Exchange Commission.