# Share Repurchase Disclosure Modernization > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2023-09965 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** June 1, 2023 - **Citation:** 88 FR 36002 ## Text SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 229, 232, 240, 249, and 274 [Release Nos. 34-97424; IC-34906; File No. S7-21-21] RIN 3235-AM94 Share Repurchase Disclosure Modernization AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: The Securities and Exchange Commission (“Commission”) is adopting amendments to modernize and improve disclosure about repurchases of an issuer's equity securities that are registered under the Securities Exchange Act of 1934. The amendments require additional detail regarding the structure of an issuer's repurchase program and its share repurchases, require the filing of daily quantitative repurchase data either quarterly or semi-annually, and eliminate the requirement to file monthly repurchase data in an issuer's periodic reports. The amendments also revise and expand the existing periodic disclosure requirements about these repurchases. Finally, the amendments add new quarterly disclosure in certain periodic reports related to an issuer's adoption and termination of certain trading arrangements. DATES: This final rule is effective on July 31, 2023. FOR FURTHER INFORMATION CONTACT: John Fieldsend, Special Counsel, Office of Rulemaking, at (202) 551-3460, Division of Corporation Finance; and, with respect to the application to investment companies, Quinn Kane, Special Counsel, at (202) 551-6792, Investment Company Regulation Office, Division of Investment Management; U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: We are adopting amendments to the following rules and forms: 1 15 U.S.C. 78a et seq. Commission reference CFR citation (17 CFR) Regulation S-K: Items 10 through 1305 §§ 229.10 through 229.1305. Item 408 § 229.408. Item 601 § 229.601. Item 703 § 229.703. Regulation S-T: Rules 10 through 903 §§ 232.10 through 232.903. Rule 405 § 232.405. Securities Exchange Act of 1934 (“Exchange Act”): 1 Rule 13a-21 § 240.13a-21. Form F-SR Form 20-F § 249.220f. Form 10-Q § 249.308a. Form 10-K § 249.310. Form N-CSR §§ 249.331 and 274.128. Table of Contents I. Introduction A. Summary of the Proposed Amendments B. Consideration of Comments C. Summary of Final Amendments II. Background A. Share Repurchases B. Purpose of the Amendments III. Discussion of Final Amendments A. Disclosure of Share Repurchases 1. Proposed Amendments 2. Comments on the Proposed Amendments a. Comments on the Daily Share Repurchase Disclosure Requirement b. Comments on Exemptions for Certain Issuers c. Comments on Repurchases Intended To Satisfy Rule 10b5-1(c) and Intended To Qualify for the Rule 10b-18 Safe Harbor d. Comments Concerning Requests for Clarification e. Other Comments 3. Final Amendments B. Narrative Revisions to Item 703 of Regulation S-K, Form 20-F, and Form N-CSR Additional Disclosure 1. Proposed Amendments 2. Comments on the Proposed Amendments a. Comments on Objective or Rationale for Share Repurchases, and Process or Criteria Used To Determine the Amount of Repurchases b. Comments on Policies and Procedures Relating to Purchases and Sales of the Issuer's Securities by Its Officers and Directors During a Repurchase Program c. Comments on Checkbox Requirement 3. Final Amendments C. Clarifying Amendments 1. Proposed Amendments 2. Comments on the Proposed Amendments 3. Final Amendments D. New Item 408(d) 1. Proposed Amendments 2. Comments on the Proposed Amendments 3. Final Amendments E. Structured Data Requirement 1. Proposed Amendments 2. Comments on the Proposed Amendments 3. Final Amendments F. Compliance Dates IV. Other Matters V. Economic Analysis A. Baseline and Affected Parties 1. Affected Parties 2. Baseline B. Benefits 1. General Benefits of the Disclosures 2. Additional Quantitative Repurchase Disclosure 3. Additional Qualitative Repurchase Disclosures 4. Inline XBRL C. Costs 1. General Costs of the Disclosures 2. Additional Quantitative Repurchase Disclosure 3. Additional Qualitative Repurchase Disclosures 4. Inline XBRL D. Efficiency, Competition, and Capital Formation E. Reasonable Alternatives 1. Alternative Reporting Frequencies and Disclosure Granularity 2. Alternative Scope of the Disclosure 3. Exemptions for Certain Issuer Categories 4. Alternative Implementation Approaches 5. Structured Disclosure 6. Compliance Dates VI. Paperwork Reduction Act A. Summary of the Collections of Information B. Summary of Comment Letters C. Summary of Collections of Information Requirements 1. Estimated Paperwork Burden for Daily Quantitative Share Repurchase Disclosures 2. Estimated Paperwork Burdens of the Narrative Share Repurchase Disclosures in Item 703 of Regulation S-K, Form 20-F, Form N-CSR, and Form F-SR 3. Estimated Paperwork Burdens of New Item 408(d) D. Incremental and Aggregate Burden and Cost Estimates VII. Final Regulatory Flexibility Analysis A. Need for, and Objectives of, the Final Amendments B. Significant Issues Raised by Public Comments C. Small Entities Subject to the Final Amendments D. Projected Reporting, Recordkeeping and Other Compliance Requirements E. Agency Action to Minimize Effect on Small Entities Statutory Authority I. Introduction A. Summary of the Proposed Amendments On December 15, 2021, 2 the Commission proposed amendments to the disclosure requirements regarding purchases of classes of equity securities registered under 15 U.S.C. 78 1 (“Exchange Act section 12”) made by or on behalf of an issuer or any affiliated purchaser. 3 The proposal was intended to modernize and improve the disclosure currently required by Item 703 of Regulation S-K, Item 16E of Form 20-F, and Item 14 of Form N-CSR about repurchases of an issuer's equity securities. 4 Specifically the Commission proposed to: 2 Share Repurchase Disclosure Modernization, Release No. 34-93783 (Dec. 15, 2021) [87 FR 8443 (Feb. 15, 2022)] (“Proposing Release”). 3 For purposes of this release, the term “issuer” includes affiliated purchasers and any person acting on behalf of the issuer or an affiliated purchaser. The term “affiliated purchaser” as used in Item 703 is defined in 17 CFR 240.10b-18(a)(3). References throughout this release to “issuer repurchases” include purchases by an affiliated purchaser and purchases by any person acting on behalf of the issuer or an affiliated purchaser. 4 Subsequent to the proposal, the Commission adopted changes to Form N-CSR that, among other things, redesignated what had been Item 9 of Form N-CSR to be Item 14. Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements, Release No. IC-34731 (Oct. 26, 2022) [87 FR 72758 (Nov. 25, 2022)]. This change became effective January 24, 2023. Id. • Require quantitative daily repurchase disclosure on a new Form SR, which would be furnished to the Commission one business day after execution of an issuer's share repurchase order; • Amend Item 703 of Regulation S-K, Item 16E of Form 20-F, and Item 14 of Form N-CSR to require additional detail regarding the structure of an issuer's repurchase program and its share repurchases; and • Require that information disclosed pursuant to Item 703 of Regulation S-K, Item 16E of Form 20-F, Item 14 of Form N-CSR, and Form SR be reported using a structured data language (specifically, Inline eXtensible Business Reporting Language or “Inline XBRL”). The Commission adopted Item 703 in 2003 5 to require disclosure of any purchase, aggregated on a monthly basis, made by or on behalf of the issuer or any affiliated purchaser of shares or other units of any class of the issuer's equity securities registered under Exchange Act section 12. Currently, Item 703 share repurchase disclosure is required in Form 10-Q for the issuer's first three fiscal quarters and in Form 10-K for the issuer's fourth fiscal quarter. 6 The same disclosure is required by Item 16E of Form 20-F on an annual basis for FPIs, and by Item 14 of Form N-CSR on a semi-annual basis for registered closed-end management investment companies that are exchange traded (“Listed Closed-End Funds”). 7 The disclosure requirements apply to both open market and private transactions, and currently require an issuer to disclose in tabular format: 5 See Purchases of Certain Equity Securities by the Issuer and Others, Release No. 33-8335 (Nov. 10, 2003) [68 FR 64952 (Nov. 17, 2003)] (“2003 Adopting Release”). The Commission concluded that disclosure of an issuer's actual purchases would inform investors whether, and to what extent, the issuer had followed through on its original plan. 6 Certain information regarding share repurchases is also required to be disclosed in an issuer's financial statements, including in the statements of cash flows indicating the amount of cash paid for repurchased securities, see ASC 230-10-45-1 to -2 and ASC 230-10-45-15, and the statements of changes in shareholders' equity indicating any reduction in securities outstanding, see ASC 505-30-5 to -10, and additional paid-in capital for the securities repurchased. See ASC 505-10-50-2 and 17 CFR 210.3-04 (“Rule 3-04 of Regulation S-X”). ASC 505-30-50 also requires footnote disclosure of state law restrictions on the availability of retained earnings for dividend payments as a result of these repurchases, if applicable. If securities are repurchased for purposes other than retirement, or if ultimate disposition has not yet been decided, the amount and cost of the repurchased securities may be shown separately on the balance sheets and statements of changes in shareholders' equity as a deduction from the total of securities, additional paid-in capital, and retained earnings. See ASC 505-30-45-1. 7 Accordingly, unless the context otherwise requires, references in this release to “Item 703” should be read to include these parallel provisions of Form N-CSR and Form 20-F. In addition to the disclosures on Form N-CSR that provide detailed information about Listed Closed-End Fund repurchases, Form N-CEN also requires closed-end management investment companies to indicate whether they engaged in a repurchase during the reporting period and, if so, for what type of security. Item D.4 of Form N-CEN. • The total number of shares (or units) purchased, regardless of amount and whether made pursuant to a publicly announced plan or program, by the issuer or any affiliated purchaser during the relevant period, reported on a monthly basis and by class, including footnote disclosure regarding the number of shares purchased other than through a publicly announced plan or program and the nature of the transaction; • The average price paid per share (or unit); • The total number of shares (or units) purchased as part of a publicly announced repurchase plan or program; and • The maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs. Footnote disclosure is also required in the aggregate of the principal terms of all 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. B. Consideration of Comments The Commission voted to issue the proposal at an open meeting on December 15, 2021. The release was posted on the Commission website that day, and comment letters were received beginning that same date. The comment period for the Proposing Release was open for 45 days and ended on April 1, 2022. 8 The Commission has reopened the comment period for the Proposing Release twice for different reasons. The first reopening occurred because certain comments on the Proposing Release were potentially affected by a technological error in the Commission's internet comment form. 9 The First Reopening Release was published in the Federal Register on October 18, 2022, and the comment period ended on November 1, 2022. 10 8 The public comments we received are available at https://www.sec.gov/comments/s7-21-21/s72121.htm. Unless otherwise indicated, the comment letters cited herein are those received in response to the Proposing Release. Two comment letters urged that the comment period for this proposal, among others, be extended to at least 60 days. See letter from United States Senator Pat Toomey and United States Representative Patrick McHenry (Jan. 10, 2022). Other commenters also asserted that the Commission provided insufficient time for comment. See, e.g., letters from American Securities Association (Apr. 1, 2022) (“ASA”), Association of the Bar of the City of New York (Apr. 1, 2022) (“NYC Bar”), Brit Stephens (Jan. 28, 2022) (“Stephens”), and U.S. Chamber of Commerce (Feb. 23, 2022) (“Chamber I”). 9 Resubmission of Comments and Reopening of Comment Periods for Several Rulemaking Releases Due to a Technological Error in Receiving Certain Comments, Release No. 33-11117 (Oct. 7, 2022) [87 FR 63016 (Oct. 18, 2022)] (“First Reopening Release”). 10 A few commenters asserted that the comment period for the reopened rulemakings was not sufficient and asked the Commission to extend the comment period for those rulemakings. See, e.g., letters from Attorneys General of the states of Montana et al. (Oct. 24, 2022) and U.S. Chamber of Commerce (Nov. 1, 2022) (“Chamber IV”). The second reopening occurred on December 7, 2022. 11 The Commission voted to reopen the comment period in connection with the addition to the comment file of a staff memorandum analyzing the potential economic effects of the new excise tax contained in the Inflation Reduction Act of 2022 12 (“Inflation Reduction Act”) on the proposed amendments. The Inflation Reduction Act was signed into law after the Proposing Release was published. The Second Reopening Release was published in the Federal Register on December 12, 2022, and the comment period closed on January 11, 2023. 13 We have considered the potential effects of the excise tax and the additional comments received 14 and determined that no changes to the proposed amendments are necessary as a result of the Inflation Reduction Act because we believe any impact of the tax on repurchases will not meaningfully affect the rationale for the amendments, as we describe in more detail below. 15 11 Reopening of Comment Period for Share Repurchase Disclosure Modernization, Release No. 34-96458 (Dec. 7, 2022) [87 FR 75975 (Dec. 12, 2022)] (“Second Reopening Release”). 12 See Public Law 117-169, 136 Stat. 1818 (2022). 13 The public comments we received in response to the First Reopening Release and the Second Reopening Release are available at the same location on the Commission's website as the other comment letters addressing the Proposing Release at https://www.sec.gov/comments/s7-21-21/s72121.htm. See supra note 8. Some commenters recommended that the Commission postpone adopting the final amendments for additional analysis of future economic conditions and the Inflation Reduction Act's impact on repurchases. See, e.g., letters from Professional Services Council (Jan. 11, 2023) (“PSC”), U.S. Chamber of Commerce (Sept. 20, 2022) (“Chamber III”), and U.S. Chamber of Commerce (Jan. 11, 2023) (“Chamber V”). One of these commenters also stated that the comment period for the Second Reopening Release was insufficient. See letter from Chamber V. 14 See infra Section V.A.2. 15 See id. For similar reasons, we do not think it is necessary to postpone adoption of the proposed amendments. We received over 170 unique comment letters on the Proposing Release and over 3,200 form letters, which we discuss in context below. We have considered all comments received since December 15, 2021, and do not believe an additional extension of the comment period is necessary. 16 16 Another comment letter raised concerns about the rulemaking process at the agency more broadly. See letter from United States Senator Thom Tillis (Nov. 4, 2022). The process followed in adopting these amendments has complied with the Administrative Procedure Act, 5 U.S.C. 551 et seq., and other legal requirements. Additionally, in January 2022, 17 the Commission proposed amendments to 17 CFR 240.10b5-1 (“Rule 10b5-1”), which provides affirmative defenses to allegations of trading on the basis of material nonpublic information in insider trading cases. The Commission also proposed new 17 CFR 229.408(a) (“Item 408(a) of Regulation S-K”) to require disclosure of, among other matters, whether the issuer adopted, modified, or terminated plans intended to meet Rule 10b5-1's conditions for establishing an affirmative defense. In December 2022, 18 the Commission adopted many of the amendments that it proposed in the Rule 10b5-1 Proposing Release, but did not adopt the portion of proposed Item 408(a) of Regulation S-K that pertains to the issuer's use of Rule 10b5-1 in response to commenters' recommendation that it be considered in the context of this rulemaking. 19 17 Rule 10b5-1 and Insider Trading, Release No. 33-11013 (Jan. 13, 2022) [87 FR 8686 (Feb. 15, 2022)] (“Rule 10b5-1 Proposing Release”). 18 Insider Trading Arrangements and Related Disclosure, Release No. 33-11138 (Dec. 14, 2022) [87 FR 80362 (Dec. 29, 2022)] (“Rule 10b5-1 Adopting Release”). 19 See, e.g., letters on the Rule 10b5-1 Proposing Release from Cravath, Swaine & Moore LLP (Mar. 31, 2022) and Simpson Thacher & Bartlett LLP (Mar. 31, 2022). We have considered the comment letters received on the Item 408(a) disclosure proposal and discuss them in the context of new Item 408(d) below. See infra Section III.D.2. Finally, prior to either proposing release, in September 2021, the Commission's Investor Advisory Committee (“IAC”) 20 issued recommendations regarding disclosure of Rule 10b5-1 plans, including that the Commission “establish meaningful guardrails around the adoption, modification, and cancellation of Rule 10b5-1 trading plans,” by addressing certain gaps in the rule that allow corporate insiders to unfairly exploit informational asymmetries. 21 20 The IAC was established in Apr. 2012 pursuant to section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act [Pub. L. 111-203, sec. 911, 124 Stat. 1376, 1822 (2010)] to advise and make recommendations to the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace. 21 See IAC, Recommendations of the Investor Advisory Committee Regarding Rule 10b5-1 Plans (Sept. 9, 2021) (“IAC Recommendations”), available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/20210916-10b5-1-recommendation.pdf. The IAC also held a panel discussion regarding Rule 10b5-1 plans at its June 10, 2021 meeting. See IAC, Meeting Minutes (June 10, 2021), available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac061021-minutes.pdf. The IAC did not consider issuer share repurchases in its deliberations on its recommendations. See IAC Recommendations, at n. 1. However, in response to the Commission's request for comment regarding Item 703 in the Commission's 2016 concept release regarding business and financial disclosures required by Regulation S-K, see Business and Financial Disclosure Required by Regulation S-K, Release No. 33-10064 (Apr. 13, 2016) [81 FR 23915 (Apr. 22, 2016)], the IAC recommended expanding the disclosure required by Item 703. See letters in response to the Concept Release from SEC Investor Advisory Committee (Jun. 15, 2016), available at https://www.sec.gov/comments/s7-06-16/s70616.htm. C. Summary of Final Amendments Having considered all of the comments we received, we are adopting the final amendments described in this release with some modifications from the proposal in response to those comments. The final amendments require the same additional detail regarding the structure of an issuer's repurchase program and its daily share repurchases, as was proposed. Further, as proposed, the final amendments require issuers to tag the disclosure using Inline XBRL. Although the final amendments require quantitative disclosure of daily repurchase data, as proposed, the frequency and manner of the disclosure is different from the proposal. Additionally, while we are requiring issuers to disclose the total number of shares repurchased pursuant to a plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c), and the date that the plan was adopted or terminated, and whether its repurchases were intended to qualify for the 17 CFR 240.10b-18 (“Rule 10b-18”) non-exclusive safe harbor, as proposed, the manner in which registrants provide this disclosure has changed from the proposal. Further, as discussed in greater detail below, the final amendments require: • Corporate issuers that file on domestic forms 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 • Foreign private issuers (“FPIs”) 22 reporting on the FPI forms 23 to disclose daily quantitative repurchase data at the end of every quarter in the new Form F-SR, 24 which will be due 45 days after the end of an FPI's fiscal quarter. 22 “Foreign private issuer” is defined in 17 CFR 230.405 (“Securities Act Rule 405”) and 240.3b-4 as any foreign issuer other than a foreign government except for an issuer meeting the following conditions as of the last business day of its most recently completed second fiscal quarter: (1) More than 50 percent of the issuer's outstanding voting securities are directly or indirectly held of record by residents of the United States; and (2) Any of the following: (i) The majority of the executive officers or directors are United States citizens or residents; (ii) More than 50 percent of the assets of the issuer are located in the United States; or (iii) The business of the issuer is administered principally in the United States. 23 The Commission has adopted a series of forms exclusively available to FPIs, including the “F-” series registration statements and Forms 20-F and 6-K disclosure forms for annual and current reports, respectively. These forms have been designed with reference to international disclosure standards, both in scope and timing requirements for filing. Although FPIs may voluntarily choose to register and report using domestic forms, most do not do so. Unless otherwise specified, all references to FPIs assume they are not filing on the domestic forms. 24 Only FPIs may file their share repurchase disclosures on the new form, so we are designating the new form as “Form F-SR” instead of “Form SR” to make it clear that this form is filed only by FPIs. As proposed, the final amendments require an issuer to include a checkbox above its tabular disclosures indicating whether certain officers and directors purchased or sold shares or other units of the class of the issuer's equity securities that are the subject of an issuer share repurchase plan or program before or after the announcement of an issuer repurchase plan or program. In a change from the proposal, we have revised the checkbox requirement so that an issuer must check the box if the triggering trades occur within four business days before or after the repurchase announcement, rather than the ten business days we proposed. For domestic corporate issuers and Listed Closed-End Funds, this checkbox requirement applies to any officer or director subject to the 15 U.S.C. 78p(a) (“Exchange Act section 16(a)”) reporting requirements. In another change from the proposal, for FPIs, this requirement applies to any director and member of senior management who would be identified pursuant to Item 1 of Form 20-F, regardless of whether the FPI is reporting on the forms exclusively available to FPIs or on the domestic forms. 25 In a further change from the proposal, the daily quantitative repurchase data required by the final amendments will be treated as filed in Form 10-Q, Form 10-K, Form N-CSR, and Form F-SR, instead of furnished. Further, the final amendments eliminate the current requirements in Item 703 of Regulation S-K, Item 16E of Form 20-F, and Item 14 of Form N-CSR to disclose monthly repurchase data in periodic reports. 25 See infra note 322 and accompanying text. We are also adopting, with some modifications from the proposal, amendments relating to the revision and expansion of the disclosure requirements in Item 703, Form 20-F, and Form N-CSR. Specifically, the final amendments require an issuer to disclose: • The objectives or rationales for its share repurchases 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 during a repurchase program by its officers and directors, including any restriction on such transactions. We are also adopting new Item 408(d), which requires quarterly disclosure in periodic reports on Forms 10-Q and 10-K (for the issuer's fourth fiscal quarter) about an issuer's adoption and termination of Rule 10b5-1 trading arrangements. This information will also be reported using Inline XBRL. II. Background A. Share Repurchases As the Commission noted in the Proposing Release, issuers may repurchase their shares through, among other means, open market purchases, tender offers, privately negotiated transactions, and accelerated share repurchases (“ASRs”). Issuers typically disclose repurchase plans or programs at the time that the share repurchases are authorized by the board of directors. Most share repurchases are executed over time through open market purchases. Issuers are not required to, and typically do not, disclose the specific dates on which they will execute trades pursuant to an announced repurchase plan or program. There are a number of reasons why issuers conduct share repurchases, and share repurchases can have a positive or negative impact on the market for an issuer's securities. The high dollar volume, nearly $950 billion in 2021, of recent share repurchase activity has been accompanied by public interest in corporate payouts in the form of share repurchases. 26 Existing studies, including a review by Commission staff in 2020, 27 have considered the rationales and effects of repurchases. As our staff concluded, repurchases are often employed in a manner that may be aligned with shareholder value maximization. Together with dividends, repurchases provide an avenue for returning capital to investors, which may be efficient if the issuer has cash it cannot efficiently deploy. Such returns of capital may also send signals to investors that managers are operating the issuer efficiently rather than retaining excess cash for potentially suboptimal use. 26 See Section V.A.2, infra. 27 See Response to Congress: Negative Net Equity Issuance (Dec. 23, 2020) (“2020 Staff Study”), available at https://www.sec.gov/files/negative-net-equity-issuance-dec-2020.pdf. Staff reports, statistics, and other staff documents (including those cited herein) represent the views of Commission staff and are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved the content of these documents and, like all staff statements, they have no legal force or effect, do not alter or amend applicable law, and create no new or additional obligations for any person. The Commission has expressed no view regarding the analysis, findings, or conclusions contained therein. Repurchases also have some unique features that are not easily replicated through dividend payments, such as potential tax advantages for some investors, repurchases' greater perceived flexibility, their potential to provide liquidity or price support when an issuer faces downward price pressure, and their effect on the amount of the issuer's shares outstanding (which may in turn mitigate dilutive effects of other share issuances or favorably adjust an issuer's leverage ratio). 28 Importantly, and as we discuss further below, because investors understand that repurchases reflect managers' judgment about whether current prices accurately reflect the issuer's fundamental value, and consume cash that could otherwise be used for other purposes, repurchases can provide a relatively credible signal of the issuer's view that its stock is undervalued. 29 However, as noted in the Proposing Release, 30 and by several commenters, 31 share repurchases may be at least partially motivated by factors other than long-term value maximization. 28 See Bonaimé, A.A. & Kahle, K.M., Share Repurchases, in Handbook of Corporate Finance (B. Espen Eckbo ed., forthcoming 2023) (“Bonaimé and Kahle (2023)”) and Farre-Mensa, J., Michaely, R., & Schmalz, M. Payout Policy, 6 Ann. Rev. Fin. Econ. 75 (2014) (“Farre-Mensa et al. (2014)”). 29 See Bonaimé and Kahle (2023), supra note 28. For more detailed discussion of this literature, see infra Section V.A.2. and infra notes 402-403 and accompanying text. 30 See Proposing Release, supra note 2, at 8444-8446. 31 See, e.g., letters from Professor Alex Edmans (May 9, 2022) (“Prof. Edmans”) and Professor Robert J. Jackson, Jr., Dr. Edwin Hu, and Dr. Jonathon Zytnick (Jun. 27, 2022) (“Prof. Jackson, Dr. Hu, and Dr. Zytnick”). At present, because issuers are not required to report daily repurchase transactions or provide additional qualitative disclosures about those transactions, it can be difficult to determine whether repurchase timing may have been motivated, at least in part, by factors other than long-term value maximization. For example, issuer repurchases may be influenced, in part, by a desire to achieve certain accounting metrics or for other potentially suboptimal reasons. 32 Some research has found that issuers that would have narrowly missed an earnings per share (“EPS”) target were more likely to have engaged in repurchases, 33 which through their mechanical effect of decreasing the denominator of that measure help such issuers to meet their target. 32 See Graham J.R., Harvey, C.R. & Rajgopal, S., The Economic Implications of Corporate Financial Reporting, 40 J. Acct. & Econ. 3 (2005) (reporting that about 12 percent of surveyed executives would use repurchases to meet an earnings forecast); see also Rulemaking Petition 4-746, Rulemaking Petition Requesting Repeal and Reform of Rule 10b-18 to Address Manipulative Repurchase Programs that Harm Workers, at 4 (June 25, 2019), available at https://www.sec.gov/rules/petitions/2019/petn4-746.pdf (citing research that repurchases can be used to inflate share price and EPS-linked executive compensation) (“Rulemaking Petition 4-746”). The 2020 Staff Study found that, while a majority of the issuers included in the study either did not have EPS-linked compensation targets or had EPS targets but their board considered the impact of repurchases when determining whether performance targets were met or in setting the targets, approximately 18 percent of repurchasing issuers made compensatory awards based in part on EPS. See 2020 Staff Study, supra note 27. Other studies have considered repurchasing issuers that employed EPS or similar measures for other internal evaluations, such as promotion or retention, see Bennett, B. et al., Compensation Goals and Firm Performance, 124 J. Fin. Econ. 307, 310, 325 (2017) (reporting that executives who just miss performance thresholds are less likely to be retained), and for the purposes of creditors or outside analysts, see Kurt, A. C., Managing EPS and Signaling Undervaluation as a Motivation for Repurchases: The Case of Accelerated Share Repurchases, 17 Rev. Acct. & Fin. 453 (2018) (noting that executives manage EPS in order to satisfy creditors and suppliers, among other reasons) (“Kurt”). For additional academic research on the use of repurchases as a method of real earnings management, see infra notes 416-420 and accompanying text. 33 See Almeida, H., Fos, V., & Kronlund, M., The Real Effects of Share Repurchases, 119 J. Fin. Econ. 168 (2016) (“Almeida et al. (2016)”) and Hribar, P., Jenkins, N., & Johnson, W.B., Stock Repurchases as an Earnings Management Device, 41 J. Acct. & Econ. 3 (2006) (“Hribar et al. (2006)”). The fact that repurchases can significantly impact executive compensation for some issuers may also affect how managers choose to employ repurchases. Like all investors, executives who receive equity-linked compensation stand to benefit from repurchases that improve their employer's long-term stock price, but in some cases executives may realize additional gains unavailable to other investors because of trading by executives or the structure of compensation to those executives. Some studies have found personal trading by insiders close in time to predictable changes in share price caused by repurchases or repurchase-plan announcements, such as concentrated sales in the period immediately following the issuer's repurchase. 34 Issuers may also adjust the timing of their repurchases or repurchase announcements to increase the returns on insider equity sales. 35 In these cases, by timing their sales to closely follow issuer purchases, executives can benefit in ways that confer a personal benefit to executives without necessarily increasing the value of the firm. 36 Thus, equity-based or EPS-tied compensation arrangements could potentially be one factor that may influence some executives' decisions to undertake repurchases. 37 Shareholders may not have sufficient information about all of these possible purposes and impacts of issuer repurchases. 34 See Jackson, Jr., R.J., Stock Buybacks and Corporate Cashouts, Speech by Commissioner Jackson Before the Center for American Progress (June 11, 2018), available at https://www.sec.gov/news/speech/speech-jackson-061118 (“Jackson Speech”); Ben-Raphael, A., Oded, J., & Wohl, A., Do Firms Buy Their Stock at Bargain Prices? Evidence from Actual Stock Repurchase Disclosures, 18 Rev. Fin. 1299 (2014); Edmans, A., Fang, V.W., & Huang, A. H., The Long-Term Consequences of Short-Term Incentives, 60 J. Acct. Res. 1007, 1024 (2022) (“Edmans et al. (2022)”); Moore, D., Strategic Repurchases and Equity Sales: Evidence from Vesting Schedules, 146 J. Banking & Fin. 106717 (2023) (“Moore”); Wang, Z., Yin, Q.E., & Yu, L., Real Effects of Share Repurchases Legalization on Corporate Behaviors, 140 J. Fin. Econ. 197 (2021); see also Cziraki P., Lyandres, E., & Michaely, R., What Do Insiders Know? Evidence from Insider Trading Around Share Repurchases and SEOs, 66 J. Corp. Fin. 101544 (2021) (“Cziraki et al. (2021)”) (finding that insider sales decline ahead of repurchases). One commenter provided us with economic analysis by Professors Lewis and White disputing the findings from Commissioner Jackson's Speech. See letter from U.S. Chamber of Commerce (Apr.1, 2022) (“Chamber II”). But see letter from Prof. Jackson, Dr. Hu, and Dr. Zytnick in response (asserting that Lewis and White's analysis of the Jackson data confirms, rather than undermines, the Jackson conclusion). 35 See Edmans et al. (2022), supra note 34 ; see also Edmans, A., Goncalves-Pinto, L., Groen-Xu, M., & Wang, Y., Strategic News Releases in Equity Vesting Months, 31 Rev. Fin. Stud. 4099 (2018) (“Edmans et al. (2018)”) (reporting that firms disproportionately release positive news items, including buyback announcements, in months when CEO equity vests) and Moore, supra note 34. 36 See Edmans et al. (2022), supra note 34 ; see also Moore, supra note 34, at 2 (reporting that author's findings are “consistent with managers strategically using share repurchases to personally benefit from the positive effects of repurchasing on the stock price”). 37 Edmans et al. (2022), supra note 34, at 1010, 1034 (noting their findings “are consistent with the CEO announcing repurchases to falsely signal undervaluation to the market to improve the conditions for his equity sales”); see also Kurt, supra note 32 (finding evidence that “managerial incentives—securing bonuses and maintaining reputations by avoiding EPS misses—potentially lie behind the opportunistic use” of some share repurchases). For a further discussion of the use of repurchases to potentially influence compensation tied to per-share measures, see infra note 422. Some commenters who opposed the proposed amendments questioned the premise that stock repurchases are deliberately used to enhance executive compensation or otherwise benefit insiders looking to sell their shares. 38 One of these commenters stated that “[c]oncerns about companies' using share repurchases to impact earnings per share (`EPS') or executive compensation are unfounded and ignore existing protections,” and pointed to recent academic work that, in the commenter's view, undermines the premise that executives undertake repurchases to boost their compensation. 39 To the extent that opposing commenters interpret this research to mean that opportunism or self-interest cannot be a significant motivating factor for share repurchases, we disagree with their assessment of the underlying evidence. 40 In this regard, we share the assessment of other commenters who argued that the research cited by opposing commenters does not undermine the proposition that personal benefit may be a factor in determining whether to undertake a share repurchase. 41 38 See letters from Chamber II and Craig M. Lewis, Professor of Law and Joseph T. White, Assistant Professor of Finance, Vanderbilt University (Oct. 7, 2022) (“Profs. Lewis and White”). 39 See letter from Profs. Lewis and White. Among other research, Profs. Lewis and White cite Guest, N., Kothari, S.P., & Venkat, P., Share Repurchases on Trial: Large-Sample Evidence on Share Price Performance, Executive Compensation, and Corporate Investment, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4149796, at 16 (Jan. 2023) (“Guest et al. ”) (asserting that the study's findings that repurchases do not distort prices “helps rule out [the] possibility” that insiders can “sell a portion of their shares at prices that are inflated due to a buyback”) and PWC, Share Repurchases, Executive Pay and Investment, BEIS Research Paper Number 2019/11, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/817978/share-repurchases-executive-pay-investment.pdf (finding that in the U.K. there is no or only weak evidence that repurchases are used to achieve EPS targets). 40 For example, with respect to Guest et al., supra note 39, as the authors of the study report, large repurchasers enjoy superior returns in the quarter after repurchase, id. at 15, but perform similarly to non-repurchasers in the following year, id. at 16. This may be consistent with short-term gains from EPS or other manipulation that are dissipated as more complete information becomes available to the market, as the researchers appear to acknowledge in a footnote, see id. at 16 n.19. Such changes in value would create opportunities for executives to profit from trades close in time to repurchases. In addition, the authors focus only on behavior of the largest or most frequent repurchasers, and market-wide correlations estimated based on those issuers are not necessarily probative of the behavior of the issuers who stand to benefit most from small changes in EPS. We are thus more persuaded by the studies that do find opportunities for executives to profit from repurchases. See supra note 34. Similarly, with respect to the PWC study, supra note 39, we note that the U.K. has required next-day reporting of repurchases since 1981, which may discourage issuers from attempting to manipulate accounting metrics with repurchases, because daily data would reveal instances where repurchases were undertaken at a time when it was obvious to management they would otherwise miss an EPS target. The opposing commenters also point to research suggesting that insider sales following a repurchase or repurchase announcement are due to coincidences of the corporate calendar ( i.e., repurchases occurring near in time to the expiration of blackout periods), not deliberate efforts by insiders to benefit from repurchase activity. See letter from Chamber II (citing Dittmann, I., Lu, A. Y., Obernberger, S., & Zheng, J. The Corporate Calendar and the Timing of Share Repurchases and Equity Compensation, Working paper (2022) (“Dittmann et al. (2022)”). But as another commenter observed: “it does not matter if the equity sales are `mechanical' due to occurring after the end of a blackout period, or `voluntary'. If the CEO knows that she will be able to sell equity, due to the blackout period ending, this may still influence her buyback decision.” See letter from Prof. Edmans. 41 See letters from Prof. Jackson, Dr. Hu, and Dr. Zytnick and Prof. Edmans. Moreover, we believe opposing commenters have misconstrued the nature of the concern the proposed amendments sought to address. As explained below, it is not necessary to find that opportunism drives the timing of most issuer share repurchases to conclude that it is appropriate for investors to have more useful information about such repurchases. Indeed, as the author of several of the studies cited by these commenters observed, personal benefit may not be “the only, or even most important, factor (as the terms `manipulation' or `opportunism' would suggest) but it may be a consideration. Thus, one does not need to believe that share buybacks are used for manipulation—a high hurdle—to find merit in the SEC's proposal.” 42 While this commenter specifically referenced the proposal to require disclosure of any policies and procedures relating to purchases and sales of the issuer's securities by its officers and directors, we believe all of the quantitative and qualitative disclosure requirements that we are adopting in this release together will serve to alert investors to the possibility of repurchases being motivated, at least in part, by goals unconnected to increasing shareholders value or signaling the issuer's view that its stock is undervalued. 43 42 See letter from Prof. Edmans. 43 See id. Currently, investors cannot readily determine the purposes behind any given share repurchase, and this uncertainty may have adverse effects on investors and markets. When managers may personally benefit from repurchases or their timing, it is not as evident, for example, that a repurchase is intended to distribute excess cash or signal management's views about the issuer's fundamental value, rather than to benefit the manager personally. Similarly, if issuers may adjust the volume or timing of repurchases to reach certain accounting targets or for other reasons that are not intended to signal management's views about the firm's value or to return excess cash, such as protecting the issuer's reputation or managing relationships with customers or suppliers, some of which may even run counter to the interest of shareholders, the signal sent by all repurchases is muddied. This market failure may make it more difficult for investors to value a company or identify when an issuer's use of cash is well-managed, reducing investor confidence and market liquidity. 44 44 We discuss in more detail the market failures addressed by the amendments in the Economic Analysis section, below. See infra Section V.B.1. The additional disclosures that we are adopting, including of daily quantitative repurchase data, 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. At the same time, we are mindful that any enhanced disclosure requirements will come at a cost for issuers, and ultimately shareholders, and should be appropriately tailored to address their intended aims. For those reasons, as discussed more fully below, we have made certain changes to the final amendments to help limit the compliance burden on issuers while still providing investors with the information they need to better assess the efficiency of, and motives behind, issuer repurchases. B. Purpose of the Amendments As we have just described, issuers repurchase shares for multiple reasons. In many cases, share repurchases may represent an efficient use of the issuer's capital, such as when returning money to shareholders exceeds other possible internal investments of capital. 45 However, some uses of share repurchases may not be efficient, such as repurchases conducted to increase management compensation or to affect various accounting metrics, in either case when those actions do not increase the value of the firm. 46 45 See supra notes 27-29 and accompanying text. 46 See supra notes 30-33 and accompanying text. Current repurchase disclosure requirements, which do not require the issuer to provide quantitative daily repurchase information or state the objectives or rationales for its repurchases and are reported in the aggregate at the monthly level, provide investors with insufficient insight into the efficiency, purposes, and impacts of an issuer's share repurchases. This frustrates the ability of investors to separate out and assess the different motivations and impacts of share repurchases. We have determined that additional disclosures are needed to remedy these market failures. Given common frictions on voluntary reporting of this information, including the strong possibility of significant divergences in the interests of managers and other investors, we believe mandatory disclosures are necessary to overcome these informational asymmetries between issuers and their managers on the one hand and investors on the other. The additional qualitative disclosures we are adopting will provide investors with additional information about the structure of an issuer's repurchase program and its share repurchases that will enable them to better understand how and why those repurchases are conducted. The qualitative disclosures, when combined with the daily repurchase activity disclosure, will allow investors to draw clearer and more informed conclusions about the purposes and effects of share repurchases. The current reporting regime, in which investors receive information only about the monthly aggregate repurchases of issuers, fails to provide enough detail for investors to draw informed conclusions about the purposes and effects of many repurchases. In contrast, the amendments we are adopting will provide investors with data about the daily repurchase activity of an issuer and additional qualitative disclosures that investors can combine with other disclosures, such as the timing of compensatory awards or executive equity transactions, to observe whether a given repurchase was apt to affect executive compensation. Data on daily transactions and the additional qualitative disclosures would also reveal patterns in which repurchases were undertaken at times or under conditions that were likely to affect imminent accounting metrics, or prior to the release of material nonpublic information by the issuer. Investment advisers may use this data in assisting investors in assessing the purposes and effects of share repurchases. Requiring that issuers provide disclosures of daily share repurchases as well as qualitative data will better enable investors to assess the efficiency, purposes, and impacts of share repurchases. These disclosures will allow investors to better evaluate whether a share repurchase was intended to increase the value of the firm or represented an inefficient deployment of capital, such as by either providing additional compensation to management or impacting accounting metrics in ways that were not intended to increase overall firm value. Disclosures of daily repurchase data and qualitative disclosures may indicate that management may have timed share repurchases in order to meet certain earnings goals or targets, to support insiders' trading positions or to otherwise increase insider compensation. Enhancing the ability of investors to assess the efficiency, purposes, and impacts of issuer repurchases would benefit investors and could improve market efficiency and capital formation. Accordingly, the purpose of these amendments is to improve the information investors receive to better assess the efficiency of, and motives behind, an issuer repurchase. In proposing to amend Item 703, the Commission expressed the view that enhanced disclosure about share repurchases would allow investors to “[b]etter understand an issuer's motivation for its share repurchase.” 47 In this way, the proposed amendments aimed to assist investors in distinguishing between share repurchases intended to increase shareholder value or signal the issuer's view that its stock is undervalued and those that instead were at least, in part, “potentially motivated by short-term attempts to boost the share price” or to achieve other inefficient objectives. 48 In the case where repurchases may increase the value of managers' compensation, for instance, one commenter stated that “[enhanced] disclosure is useful because it alerts the market to the possibility of buybacks being at least partially influenced by the CEO's equity sales.” 49 We agree and, with the benefit of the comments received on the proposed amendments, continue to believe that an investor's ability to assess the impact of a given repurchase depends in part on having the information necessary to evaluate the purposes for which the repurchase was undertaken. 47 Proposing Release, supra note 2, at 8445. 48 Proposing Release, supra note 2, at 8446 and 8457. 49 See letter from Prof. Edmans. We understand that issuers may employ open-market stock repurchases to credibly signal to investors the issuer's view of the stock's fundamental value. 50 The possibility that repurchases may be, in part, motivated by goals unconnected to the issuer's fundamental value, such as the manager's compensation or reputation or achieving accounting metrics required by creditors or expected by analysts, would reduce the credibility of such signals, even among issuers whose repurchases are solely intended to signal management's view of the issuer's value. Similarly, due to asymmetries in information between the issuer and investors, investors cannot typically observe directly whether a repurchase represented an efficient use of excess cash aimed at increasing the issuer's value. Thus, the possibility that some repurchases are motivated by reasons other than shareholder value maximization complicates investor efforts to make this determination absent additional information not currently required to be disclosed. 50 See, e.g., Asquith, P. & Mullins, Jr. D.W., Signaling with Dividends, Stock Repurchases, and Equity Issues, 15 Fin. Mgmt. 27, 33-34 (1986). Further, as we noted in the Proposing Release, 51 and as described above, there is evidence from which investors could reasonably conclude that some repurchases are at least in part motivated by goals such as executive compensation or achieving certain accounting targets. Thus, as the Commission stated, “it can be difficult for investors to determine whether the undertaken repurchases were efficient and aligned with shareholder value maximization, or were at least in part driven by self-interested behavior of corporate insiders rather than shareholder interest.” 52 Accordingly, we believe that investors should have sufficient information about how issuers conduct repurchases to make informed judgments about the likely purposes and effects of the repurchases, including whether such repurchases provide credible information about the value of the issuer. 51 See Proposing Release, supra note 2, at 8444-8445. 52 Proposing Release, supra note 2, at 8455. We acknowledge that many, perhaps even most, share repurchases are not undertaken solely or primarily to benefit managers or to achieve targets, such as those based on EPS. Indeed, as commenters noted, Commission staff have previously assessed that it is “unlikely” that a “majority” of repurchases are so motivated, and instead that “most” repurchases are consistent with shareholder value maximization. 53 53 See, e.g., letters from Cato Institute (Apr. 1, 2022) (“Cato”), Chamber II, Maryland State Bar Association (Apr. 5, 2022) (“Maryland Bar”), and National Association of Manufacturers (Mar. 31, 2022) (“NAM”). That fact, however, does not aid investors who are attempting to assess the efficiency of, and information conveyed by, any given repurchase by a particular issuer. 54 Given the opportunity for repurchases to affect executive compensation or help an issuer to achieve certain accounting measures, as well as the evidence that some repurchases do so, investors cannot currently be certain that any given repurchase in fact conveys information about the issuer's fundamental value. Thus, as the Commission explained in the Proposing Release, additional disclosures would, for example, “help investors gauge whether . . . repurchases may be motivated by price support for insiders' sales of their securities, rather than conveying a true signal of undervaluation.” 55 In this regard, we agree with the observations of a commenter who compared this rationale to disclosure requirements for potentially self-interested financial advisors where disclosure allows a client to “take into account the possibility of a conflict.” 56 54 See, e.g., letters from Better Markets (Apr. 1, 2022) (“Better Markets I”) (noting that “disclosures will help investors identify `opportunistic' share repurchases designed primarily to benefit management, not the company”) and Council of Institutional Investors (Mar. 31, 2022) (“CII”) (stating the amendments “could strengthen the market's ability to assign premia to companies that make capital allocation decisions optimizing the company's long-term performance and assign discounts to companies that do not”). 55 Proposing Release, supra note 2, at 8457. 56 See letter from Prof. Edmans (stating that this is similar to how financial advisors must disclose the commission on products that they are offering to their clients, such that, although the product pays the highest commission to the advisor, it is also in the best interest of the client, so there is no conflict, but the disclosure is useful to allow the client to take into account “the possibility of” a conflict). Further, even efficient repurchases have the potential to negatively affect investor confidence. As we have described previously, we are concerned that, in some cases, issuers may repurchase their stock while the relevant decision makers are aware of material nonpublic information. 57 Because issuers are repurchasing their own securities, asymmetries may exist between issuers and investors with regard to information about the issuer and its future prospects. Investors may be more reluctant to trade in the presence of such informational asymmetries. 58 57 See Rule 10b5-1 Adopting Release, supra note 18, at 80362-80363 and 80372. 58 One commenter suggests that issuers undertake voluntary arrangements that limit their ability to repurchase at a time the relevant decision maker is aware of material nonpublic information, and therefore that the threat of such trading should not serve as a basis for the amendments. See letter from Securities Industry and Financial Markets (Apr. 1, 2022) (“SIFMA II”). Other academic research suggests, however, that some issuers conduct repurchases at times they are likely to be aware of material nonpublic information and earn average returns on their trades that are not achieved by other traders. See Bonaimé, A.A., Harford, J., & Moore, D., Payout Policy Tradeoffs and the Rise of 10b5-1 Preset Repurchase Plans, 66 Mgmt. Sci. 2291 (2020) (reporting that one-third of disclosed issuer 10b5-1 plans begin trading within one day of adoption) (“Bonaimé et al. (2020)”). In light of these concerns, the concerns expressed by commenters, 59 and our expectation that the volume of share repurchases will continue to be significant, we are persuaded that investors would benefit from additional and more detailed quantitative and qualitative information related to issuer share repurchases. Such disclosures would help investors evaluate the purposes, impacts, and efficiency of share repurchases. Additional information regarding an issuer's repurchase activity may reveal, for instance, whether those repurchases likely affected managers' compensation. 59 See, e.g., letters from Amy Lewis (Dec. 15, 2021) (“Lewis”); California Public Employees' Retirement System (Mar. 30, 2022) (“CalPERS”), CFA Institute (Apr. 6, 2022) (“CFA Institute”), CII, and Form Letter A. The daily quantitative repurchase data we are requiring will assist investors in understanding the purposes and effects of repurchases. For example, these data will help investors to identify repurchases undertaken close in time to the date on which an accounting measure, such as EPS, is likely to trigger other effects. In many cases, repurchase data aggregated at the monthly level would not be sufficiently detailed to shed light on these patterns. Similarly, daily data may allow investors to determine whether an executive may have sold equity during a month in which there was heavy repurchase activity, and data aggregated at the monthly level leave it unclear whether the sales preceded or followed the bulk of the repurchases. We recognize that these data will not by themselves establish that a repurchase was undertaken for any particular purpose. As a result, the final amendments also require issuers to provide investors with more detailed qualitative information that they could use to evaluate issuer share repurchases in conjunction with the daily quantitative repurchase data. We believe that the quantitative and qualitative information will work together to help investors to identify repurchases in which efforts to affect compensation or accounting measures may have played a larger role, and help to credibly identify repurchases where such goals were unlikely to have played a significant role. Detailed reporting could also reveal instances in which an issuer made large repurchases in advance of announcing material nonpublic information or allow investors to more readily observe instances in which share repurchases may have been timed to allow trading while the issuer was aware of material nonpublic information or to benefit from other asymmetries. Investors could consider this information in making future investment decisions with respect to a given issuer. In many instances, reporting of repurchase activity in aggregate monthly amounts, as required by our current requirements, may not be precise enough to reveal patterns in repurchases. Again, we also believe that qualitative information regarding an issuer's purposes for and policies regarding repurchases will further aid investors in understanding these daily quantitative data, and in using them to assess the efficiency of, and motivations for a repurchase. The amendments require more detailed quantitative and qualitative disclosure about issuer share repurchases, and require issuers to present the disclosure using a structured data language. We believe that the final amendments will promote investor protection by allowing investors to: • Better understand the extent of an issuer's activity in the market, including potential impacts on the issuer's share price; • Better understand an issuer's motivation for its share repurchases, and how it has structured and is executing its purchase plan; and • Gain potential insight into any relationship between share repurchases and executive compensation and stock sales. III. Discussion of Final Amendments A. Disclosure of Share Repurchases 1. Proposed Amendments The Commission proposed new Exchange Act Rule 13a-21 and new Form SR, which would require issuers, including FPIs and certain Listed Closed-End Funds, to report any daily purchase made by or on behalf of the issuer or any affiliated purchaser of shares or other units of any class of the issuer's equity securities that are registered pursuant to Exchange Act section 12. 60 The issuer would be required to furnish the daily detail in Form SR on the Commission's Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system before the end of the first business day following the day on which the issuer executes a share repurchase. The Form SR would require the following disclosure in tabular format, by date, for each class or series of securities: 60 Currently, registered investment companies other than Listed Closed-End Funds are not required to provide the repurchase disclosure under Item 703 of Regulation S-K as implemented in Form N-CSR. Accordingly, proposed Form SR also would not be filed by registered investment companies other than Listed Closed-End Funds. Business development companies, which are not registered investment companies, provide the repurchase disclosure of Item 703 on Forms 10-K and 10-Q rather than Form N-CSR. (1) Identification of the class of securities purchased; (2) The total number of shares (or units) purchased, including all issuer repurchases whether or not made pursuant to publicly announced plans or programs; (3) The average price paid per share (or unit); (4) The aggregate total number of shares (or units) purchased on the open market; (5) The aggregate total number of shares (or units) purchased in reliance on the Rule 10b-18 non-exclusive safe harbor; 61 and 61 Rule 10b-18 provides issuers with a safe harbor from liability for manipulation under 15 U.S.C. 78i(a)(2) (“Exchange Act section 9(a)(2)”) and 15 U.S.C. 78j(b) (“Exchange Act section 10(b)”) when they repurchase their common stock in the market in accordance with the rule's manner, timing, price, and volume conditions. The proposed disclosure would not provide a defense to manipulative conduct for purchases that are not in fact eligible to rely on the safe harbor. (6) The aggregate total number of shares (or units) purchased pursuant to a plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). 62 62 The Commission adopted Rule 10b5-1 in 2000 to clarify the meaning of “manipulative or deceptive device[s] or contrivance[s]” prohibited by Exchange Act section 10(b) and Rule 10b-5 with respect to trading on the basis of material nonpublic information. See Selective Disclosure and Insider Trading, Release No. 33-7881 (Aug. 15, 2000) [65 FR 51716 (Aug. 24, 2000)]. Rule 10b5-1(c) established an affirmative defense to Rule 10b-5 liability for insider trading in circumstances where it is clear that the trading was not based on material nonpublic information and the trade was pursuant to a binding contract, an instruction to another person to execute the trade for the instructing person's account, or a written plan. The proposed amendments would also require an issuer to disclose material errors or changes to information previously reported on an amended Form SR, which the Commission indicated would allow for timely and accurate disclosure the day after execution of the share repurchase order, with the ability to make corrections, if needed, in amended filings. Additionally, the Commission proposed to require issuers to furnish, rather than file, Form SR. As a result, issuers would not be subject to liability under 15 U.S.C. 78r (“Exchange Act section 18”) for the disclosure in the form, and the information would not be deemed incorporated by reference into filings under the Securities Act and thus would not be subject to liability under 15 U.S.C. 77k (“Securities Act section 11”), unless the issuer expressly incorporated such information. 63 63 In addition, by requiring the Form SR to be furnished, a late submission of the form would not affect eligibility to use Form S-3 or to file a short-form registration statement under General Instruction A.2 of Form N-2. General Instruction I.A.3(b) to Form S-3 requires that all reports required to be filed with the Commission during the preceding 12 months have been filed; the same requirements apply under General Instruction A.2 of Form N-2. 2. Comments on the Proposed Amendments a. Comments on the Daily Share Repurchase Disclosure Requirement Although there was substantial opposition to the proposal, 64 several commenters generally supported the proposed daily repurchase disclosure. 65 Some of the commenters that supported the proposed amendments asserted that they would reduce information asymmetries between issuers and investors, 66 which would result in “greater confidence that they can find accurate, comprehensive information about a security and the broader investment field.” 67 Other commenters stated that daily disclosure of share repurchases would increase transparency. 68 64 See, e.g., letters from American Bar Association, Federal Regulation of Securities Committee (Apr. 13, 2022) (“ABA Committee”); American Council of Life Insurers (Feb. 22, 2022) (“ACLI”); ASA; Bank Policy Institute & American Bankers Association (Apr. 1, 2022) (“BPI & Amer. Bankers Assoc.”); Cato; Chamber II; Chevron Corporation (Mar. 31, 2022) (“Chevron”); Coalition of Business Trades (Apr. 1, 2022) (“Coalition”); Cravath, Swaine & Moore LLP (Mar. 31, 2022) (“Cravath”); Davis Polk & Wardwell LLP (Mar. 28, 2022) (“Davis Polk”); DLA Piper LLP (Apr. 1, 2022) (“DLA Piper”); Dow Inc. (Apr. 1, 2022) (“Dow”); FedEx Corporation (Apr. 1, 2022) (“FedEx”); Fenwick & West LLP (Mar. 31, 2022) (“Fenwick”); Guzman & Company (Mar. 28, 2022) (“Guzman”); Home Depot, Inc. (Apr. 1, 2022) (“Home Depot”); HP Inc. (Apr. 1, 2022) (“HP”); Institute for Portfolio Alternatives (Mar. 28, 2022) (“IPA”); International Bancshares Corporation (Apr. 1, 2022) (“IBC”); Jones Day (Mar. 31, 2022) (“Jones Day”); Keith Paul Bishop, former California Commissioner of Corporations (Apr. 6, 2022) (“Bishop”); Maryland Bar; NAM; Norfolk Southern Corporation (Mar. 31, 2022) (“Norfolk Southern”); NYSE Group, Inc. (Apr. 1, 2022) (“NYSE”); Paul, Weiss, Rifkind, Wharton & Garrison LLP (Apr. 1, 2022) (“Paul Weiss”); Pennsylvania Chamber of Business and Industry (Apr. 1, 2022) (“PA Chamber”); PNC Financial Services Group (Mar. 30, 2022) (“PNC”); Profs. Lewis and White; PSC; Quest Diagnostics (Apr. 1, 2022) (“Quest”); Shearman & Sterling LLP (Apr. 1, 2022) (“Shearman”); SIFMA II; Simpson Thacher & Bartlett LLP (Mar. 31, 2022) (“Simpson Thacher”); Society for Corporate Governance (Apr. 1, 2022) (“SCG”); Sullivan & Cromwell (Apr. 1, 2022) (“Sullivan”); T. Rowe Price (Mar. 30, 2022) (“T. Rowe Price”); Virtu Financial (Mar. 29, 2022) (“Virtu”); Vistra Corp. (Apr. 1, 2022) (“Vistra”); and Wilson Sonsini Goodrich & Rosati (Apr. 18, 2022) (“Wilson Sonsini”). 65 See, e.g., letters from Alex Hanson-Michelson (Oct. 18, 2022) (“Hanson-Michelson”); Americans for Financial Reform Education Fund et al. (Apr. 1, 2022) (“AFREF et al. ”); Amy (Oct. 23, 2022) (“Amy”); Anonymous (Oct. 29, 2022) (“Anonymous V”); Anonymous (Oct. 30, 2022) (“Anonymous VI”); Anonymous, Retail Investor (Dec. 26, 2022) (“Anonymous VII”); Arun R. (Oct. 8, 2022) (“Arun”); Better Markets I; Better Markets (Jan. 11, 2023); BrilLiquid LLC (Apr. 1, 2022) (“BrilLiquid”); CalPERS; Calvin Satterfield (Jan. 13, 2023) (“Satterfield”); CFA Institute; CII; David B. (Oct. 9, 2022) (“David”); David Jaggard (Oct. 13, 2022) (“Jaggard”); Richard L. Hecht, Adubon Consulting Group (Jan. 27, 2022) (“Hecht”); International Corporate Governance Network (Mar. 31, 2022) (“ICGN”); James Lutes (Jan. 10, 2023) (“Lutes”); James Mahr (Oct. 8, 2022) (“Mahr”); Joe Hernandez (Oct. 30, 2022) (“Hernandez”); Joseph Krugel (Oct. 30, 2022) (“Krugel”); Kayden Fox (Oct. 8, 2022) (“Fox”); Lewis; Marc Pentacoff (Dec. 23, 2021) (“Pentacoff”); Mike Kerr (Aug. 16, 2022) (“Kerr”); North American Securities Administrators Association, Inc. (Apr. 1, 2022) (“NASAA”); National Employment Law Project (Apr. 1, 2022) (“NELP”); Oxfam America (Apr. 1, 2022) (“Oxfam”); Professor Lenore Palladino, UMass Amherst (Mar. 30, 2022) (“Prof. Palladino”); Prof. Jackson, Dr. Hu, and Dr. Zytnick; Public Citizen (Apr. 1, 2022) (“Public Citizen”); Roosevelt Institute (Mar. 31, 2022) (“Roosevelt”); Stephen, Consultant (Dec. 29, 2022) (“Stephen”); Stephane Mans (Jan. 12, 2023) (“Mans”); U.S. Senators Marco Rubio and Tammy Baldwin (Apr. 1, 2022) (“Senators Rubio & Baldwin”). Additionally, Form Letter A supported the proposal. 66 See, e.g., letters from CFA Institute and Lewis. 67 See letter from Lewis. 68 See, e.g., letters from Amy, Anonymous V, Anonymous VI, Anonymous VII, Andrew (Dec. 26, 2022), Arun, CalPERS, David, D.L. (Jan. 11, 2023), Fox, Hanson-Michelson, Hernandez, Jaggard, Kerr, Krugel, Lutes, Mahr, Mans, Satterfield, and Stephen. Some commenters asserted that issuers would be able to comply with the proposed requirement to provide daily repurchase disclosure one business day after execution of an issuer's share repurchase order because issuers already comply with these types of strict deadlines in other markets, and section 16 insiders must report their purchases and sales within two business days. 69 Other commenters suggested that the costs of the proposed amendments would be minimal, 70 with one commenter noting that, at most, the proposed amendments would be “a minor incremental administrative burden.” 71 Some commenters indicated that the proposed amendments would enable the Commission to determine issuers' compliance with the Rule 10b-18 safe harbor. 72 One form comment letter asserted that such daily disclosure would reduce the amount of time that insiders know of a repurchase while other investors remain ignorant and “give the Commission the tools to enforce existing laws.” 73 69 See, e.g., letters from CalPERS and ICGN. 70 See e.g., letters from Better Markets I, CFA Institute, and Prof. Palladino (stating that the costs of daily reporting “should be minimal given the well-established regular reporting of other financial metrics to the Commission, and the fact that companies are already reporting aggregate stock buybacks data, which must be determined from micro-level data”). 71 See letter from CFA Institute. 72 See, e.g., letters from NELP, Prof. Palladino, and Roosevelt. These commenters were generally concerned about issuers manipulating the market for their securities through buybacks executed not in accordance with the Rule 10b-18 safe harbor. 73 See letter from Form Letter A. Many commenters opposed the proposal due to the proposed requirement that issuers provide daily repurchase disclosure one business day after execution of an issuer's share repurchase order. 74 Some of these commenters indicated that existing disclosure rules require near real-time trading information only in situations involving changes in corporate control or trading by insiders, 75 and share repurchase activity does not carry the same signaling value as those situations. 76 Other commenters asserted that the justification for the one business day requirement is not evident. 77 A number of commenters asserted that the proposed amendments would increase costs without a corresponding benefit. 78 Some commenters suggested that daily repurchase disclosures could cause investors to misinterpret an issuer's day-to-day changes in trading activity, 79 which could result in unjustified stock price volatility 80 or the disruption of confidential merger or acquisition discussions. 81 Additionally, although some commenters suggested that investors might use daily disclosure data to identify the issuer's trading strategies, 82 other commenters observed that a move to periodic reporting should substantially mitigate any such concern. 83 74 See, e.g., letters from ACCO Brands Corporation (Mar. 30, 2022) (“ACCO”), ACLI, ASA, Bishop, BPI & Amer. Bankers Assoc., Business Roundtable (Apr. 1, 2022) (“Business Roundtable”), Cato, Chamber II, Chamber III, Chevron, Coalition, Cravath, Davis Polk, DLA Piper, Dow, Ed Armstrong (Dec. 28, 2021) (“Armstrong”), Empire State Reality Trust (Mar. 29, 2022) (“Empire”), FedEx, Guzman, Hecht, Home Depot, HP, IBC, Jones Day, Kirkland & Ellis LLP (Apr. 1, 2022) (“Kirkland Ellis”), Maryland Bar, NAM, Norfolk Southern, NYC Bar, NYSE, PA Chamber, Paul Weiss, Pay Governance (Jan. 24, 2022) (“Pay Governance”), PNC, Profs. Lewis and White, Quest, SCG, Shearman, SIFMA II, Simpson Thacher, Stephens, Stuart Kaswell, Esq. (Mar. 18, 2022) (“Kaswell”), Sullivan, T. Rowe Price, Virtu, Vistra, and Wilson Sonsini. One of these commenters stated that, because investors only see earnings quarterly, management's attempt to use repurchases to affect their pay would only been detected quarterly, and daily disclosures would not help. See letter from Profs. Lewis and White. 75 See, e.g., letters from Davis Polk (stating that “only in cases involving potential changes in corporate control—where the information called for by Schedule 13D is plainly necessary to allow investors to make informed investment decisions—and in cases involving trading by officers, directors and ten percent shareholders, whose trading may signal changes in insider sentiment and corporate prospects unknown to the public market”) and T. Rowe Price. 76 See letter from Davis Polk. 77 See letters from Chamber II, NAM, and T. Rowe Price. 78 See, e.g., letters from Armstrong, BPI & Amer. Bankers Assoc., Business Roundtable, Cato, Chamber II, Coalition, Davis Polk, DLA Piper, Dow, Guzman, Maryland Bar, Profs. Lewis and White, Quest, SCG, T. Rowe Price, and Vistra. For example, commenters claimed that daily disclosure could boost share price, resulting in higher repurchase costs; push issuers to revise or abandon share repurchase plans; cause issuers to substitute ASRs for daily repurchases, which would increase costs and limit flexibility; discourage stock-based compensation; deter potential capital allocation decisions; burden personnel; and incentivize the use of larger financial firms over smaller ones. See, e.g., letters from Coalition, Davis Polk, DLA Piper, Guzman, Maryland Bar, Profs. Lewis and White, Quest, SCG, T. Rowe Price, and Vistra. 79 See, e.g., letters from Business Roundtable, Davis Polk, Dow, FedEx, Home Depot, Kaswell, Profs. Lewis and White, NAM, PNC, Quest, Shearman, SIFMA II, Simpson Thacher, T. Rowe Price, Wilson Sonsini, and Vistra. For example, some of the commenters noted that a benign halt in purchases could be misinterpreted as a signal that the issuer has material nonpublic information or that the issuer has lost confidence in the value of its stock. See, e.g., letters from Business Roundtable, Davis Polk, Dow, Home Depot, NAM, Profs. Lewis and White, Quest, SCG, Simpson Thacher, T. Rowe Price, and Vistra. One commenter noted that misinterpretation risks are heightened for financial services companies because a halt in their share repurchases could be due to supervisory action by the Federal Reserve or other regulators, but the issuer may be barred from disclosing such action. See letter from PNC. 80 See, e.g., letters from Cravath, Davis Polk, Profs. Lewis and White, and SCG. 81 See, e.g., letters from Davis Polk, PNC, SIFMA II, and Sullivan. 82 See letters from Home Depot and PNC. 83 See letters from Cravath and Davis Polk. Several commenters claimed that daily disclosures would result in an overload of information 84 that would be too disaggregated for retail investors to easily parse. 85 Commenters also expressed the view that hedge funds and other professional traders would leverage daily repurchase information to exploit arbitrage opportunities 86 and actually increase information asymmetry. 87 Some commenters asserted that we have failed to identify a “market failure” that would justify additional disclosures and expressed the view that information asymmetry is advantageous to markets because it incentivizes some market actors to expend resources developing information that would be relevant to an issuer's share price. 88 84 See, e.g., letters from Dow, Kirkland Ellis, NYSE, SCG, and Vistra. 85 See, e.g., letters from ACLI, Armstrong, ASA, Chevron, Cravath, Dow, Guzman, Hecht, Home Depot, Jones Day, NYSE, PNC, Profs. Lewis and White, Quest, SCG, Shearman, SIFMA II, and Simpson Thacher. 86 See, e.g., letters from ACCO, Armstrong, ASA, BPI & Amer. Bankers Assoc., Business Roundtable, Cato, Chevron, Coalition, Cravath, Davis Polk, DLA Piper, Dow, Empire, FedEx, Guzman, Home Depot, HP, IBC, Jones Day, NAM, NYC Bar, Norfolk Southern, PA Chamber, Paul Weiss, PNC, Profs. Lewis and White, Quest, Shearman, SIFMA II, SCG, Simpson Thacher, Stephens, Sullivan, T. Rowe Price, Vistra, and Wilson Sonsini. One commenter noted that sophisticated investors already use their superior technology and resources, which are not available to ordinary investors, to identify trading opportunities and earn positive returns by processing the high-frequency information available on Form 4. See letter from Profs. Lewis and White. 87 See, e.g., letters from NYSE and Profs. Lewis and White. 88 See, e.g., letters from Chamber II and Profs. Lewis and White. Several commenters asserted that the proposed daily repurchase disclosures on Form SR may encourage issuers to act inefficiently to mitigate the negative consequences of daily disclosure. 89 Commenters suggested that issuers may shift from more conservative daily dollar cost averaging strategies to the more costly practice of effecting larger repurchases on fewer days to avoid triggering speculation, continue daily repurchases when it does not make financial sense to do so, or limit their average daily trading volume to try to ensure that sophisticated investors viewed the daily trades as immaterial, even if a larger volume would be more beneficial to shareholders. 90 One commenter suggested that share repurchase disclosures are unnecessary because, even if managers benefit from repurchases through an increased share price, such an increase also benefits other existing shareholders. 91 89 See, e.g., letters from Chevron, Davis Polk, DLA Piper, Profs. Lewis and White, SIFMA II, and Sullivan. 90 See, e.g., letters from ACCO, Armstrong, ASA, BPI & Amer. Bankers Assoc., Business Roundtable, Cato, Chevron, Coalition, Cravath, Davis Polk, DLA Piper, Dow, Empire, FedEx, Guzman, Home Depot, HP, IBC, Jones Day, NAM, NYC Bar, Norfolk Southern, PA Chamber, Paul Weiss, PNC, Quest, Shearman, SIFMA II, SCG, Simpson Thacher, Stephens, Sullivan, T. Rowe Price, Vistra, and Wilson Sonsini. 91 See letter from Maryland Bar. Some commenters asserted that share repurchase information is not meaningful to investors because investors have never asked for detailed share repurchase information. 92 One commenter stated that the proposed amendments would interfere with a corporation's state law duties by discouraging and deterring companies from undertaking repurchases that they otherwise judge to be in shareholders' interest. 93 Another commenter asserted that the proposed amendments would violate the First Amendment because the proposed amendments “do[ ] not acknowledge the compelled-speech burdens that come with a next-day reporting regime.” 94 92 See, e.g., letters from ACCO and Norfolk Southern. See also letter from Profs. Lewis and White (stating that daily repurchase data is generally immaterial to investors and that many issuers already disclose completion or cancellation of open market repurchase programs if they believe it is material). 93 See letter from Cato. 94 See letter from Chamber III. A number of commenters disputed the proposal's assertion that the use of share repurchases may help some insiders achieve performance targets. 95 Several of these commenters 96 cited the 2020 Staff Study 97 for support, particularly the study's statement that “82% of the firms reviewed either did not have EPS-linked compensation targets or had EPS targets but their board considered the impact of repurchases when determining whether performance targets were met or in setting the targets.” 98 On the other hand, one commenter 99 asserted that the proposal did not go far enough to address executive compensation concerns and urged that the Commission revise Instruction 7 to 17 CFR 229.402(d) (“Item 402(d) of Regulation S-K”) to require issuers to disclose whether their repurchase plans triggered additional compensation. 95 See, e.g., letters from Bishop, Cato, Chamber II, Coalition, Maryland Bar, PA Chamber, Pay Governance, Profs. Lewis and White, SCG, T. Rowe Price, Virtu, and Vistra. But see letter from Kaswell (stating that the proposal does not go far enough to address executive compensation concerns and urged that issuers be required to disclose whether their repurchase plans triggered additional compensation). Additionally, commenters stated that the proposal does not reflect the reality that many compensation plans adjust for repurchases management could not use share repurchases to inflate earnings because doing so would be thwarted by an issuer's compensation committee and/or its investors. See, e.g., letters from Chamber II and Profs. Lewis and White. 96 See, e.g., letters from Bishop, Cato, Chamber II, Coalition, Profs. Lewis and White, T. Rowe Price, Virtu, and Vistra. 97 See 2020 Staff Study, supra note 27. See also infra note 383 and accompanying text. 98 Id. at 42. Another commenter cited its own study showing that total shareholder return and capital expenditure growth are higher for companies with larger buybacks than for companies with smaller buybacks and concluded that EPS-based incentive plans do not encourage short-term gains at the expense of long-term performance. See letter from Pay Governance. 99 See letter from Kaswell. One commenter asserted that the amendments are contrary to the Commission's prior statement to “minimize the market impact of the issuer's repurchases, thereby allowing the market to establish a security's price based on independent market forces without undue influence by the issuer.” 100 Several commenters asked the Commission to adopt alternative methods and deadlines for issuers to provide share repurchase disclosures. Some of these commenters suggested that issuers should make their share repurchase disclosures on Form 8-K if the repurchases exceed specified volume thresholds, 101 such as one 102 or two 103 percent of the issuer's total outstanding shares, or some other threshold. 104 Other commenters suggested extending the Form SR filing deadline to two days, 105 ten days, 106 or one month after the trade, 107 or one day after settlement. 108 A number of commenters recommended scaling back the proposal by changing the deadline for the share repurchase disclosure and the period that the disclosure would encompass. 109 Commenters suggested the following deadlines and periods: 100 See letter from Chamber II (quoting 2003 Adopting Release, supra note 5, at 64953). 101 See, e.g., letters from ABA Committee, DLA Piper, Maryland Bar, NYC Bar, NYSE, and Sullivan. 102 See, e.g., letters from ABA Committee, DLA Piper, NYSE, Maryland Bar, and Sullivan. 103 See letter from Simpson Thacher. 104 See letter from FedEx (suggesting that the amendments replace the share repurchase disclosure on proposed Form SR with disclosure on Form 8-K, but did not specify the trigger at which the Form 8-K would be required). 105 See, e.g., letters from CII and Philip Forbini (Jan. 11, 2023). 106 See letter from Jones Day. 107 See id. 108 See letter from NASAA. 109 See, e.g., letters from Anthem Advisors LLC (Dec. 19, 2022) (“Anthem Advisors”); Armstrong; BrilLiquid; Chamber II; Cravath; DLA Piper; Guzman; Hecht; Home Depot; HP; Jones Day; Charles Morris, Greenhouse Funds LLP (Dec. 16, 2021) (“Morris”); NAM; Pentacoff; Quest; SCG; SIFMA II; Simpson Thacher; and Stephens. Additionally, one commenter stated that, if the final amendments include Listed Closed-End Funds, those funds should only be required to provide daily information semi-annually in their Form N-CSR. See letter from Investment Company Institute (Apr. 1, 2022) (“ICI I”). • Quarterly reporting of daily data; 110 110 See letter from Jones Day (stating that the amendments could achieve the same goals through quarterly disclosure of daily data). • Quarterly or monthly reporting of daily data; 111 111 See letter from Anthem Advisors (stating that requiring daily disclosures in a single monthly or quarterly report listing all transactions during the preceding period would be preferable because it would more easily accessed in EDGAR and more easily understood). • Quarterly reporting of biweekly data or limited daily information; 112 112 See letter from Home Depot (recommending, as an alternative, supplementing current Item 703 disclosure with a list of dates on which repurchases were made, without the daily volume). • Monthly reporting of daily data; 113 113 See letter from Cravath (stating that monthly disclosure of daily data would strike a better balance between the benefits of the information and the negatives of abuse, noise, and the need to correct failed trades). • Monthly reporting of biweekly data; 114 114 See letter from Home Depot (offering this frequency and period as an alternative to its prior recommendation of quarterly reporting of biweekly data). • Monthly reporting of monthly data; 115 and 115 See, e.g., letters from Armstrong, Chamber II, DLA Piper, Guzman, HP, Morris, NAM, Quest, SCG, SIFMA II, Simpson Thacher, and Stephens. • Weekly reporting of weekly data. 116 116 See, e.g., letters from BrilLiquid, Guzman, Hecht, and Pentacoff. Moreover, one commenter supported the proposal to allow Form SR to be furnished to the Commission instead of filed, stating that “inadvertently submitting incorrect data” on the form should not “automatically open the door” to private litigation, particularly section 11 claims, 117 and another commenter suggested that the final amendments include a safe harbor permitting issuers to correct Form SR errors without liability within four business days of the end of the calendar month in which corrections are identified. 118 Some commenters asked the Commission to provide more specificity around the materiality standard governing amendments to Form SR, and recommended either a three or five percent misstatement threshold. 119 One commenter disagreed with any materiality threshold, stating that such a threshold would be more confusing than beneficial. 120 117 See letter from NASAA. 118 See letter from Cravath. 119 See, e.g., letters from Hecht and NASAA. 120 See letter from ICGN. b. Comments on Exemptions for Certain Issuers Several commenters discussed whether the Commission should exempt certain categories of issuers from the amendments. 121 Commenters were split between their support for, 122 and opposition to, 123 exempting FPIs from the proposed quantitative daily disclosure requirements. The commenters that supported an exemption were generally concerned that requiring FPIs to file Form SR would deviate from the Commission's historic practice of deferring to an FPI's home country disclosure requirements, and some claimed that applying the proposed amendments to FPIs would subject them to multiple, differing disclosure regimes. 124 121 See, e.g., letters from ABA Committee, ACCO, Alternative & Direct Investment Securities Association (Mar. 31, 2022) (“ADISA”), Better Markets I, BPI & Amer. Bankers Assoc., BrilLiquid, Canadian Bankers Association (Mar. 31, 2022) (“CBA”), CFA Institute, CII, Cravath, Hecht, IBC, ICGN, ICI I, Nareit (Mar. 31, 2022) (“Nareit”), NYC Bar, NYSE, Profs. Lewis and White, Roosevelt, SIFMA II, Sullivan, Teachers Insurance and Annuity Association of America (Apr. 1, 2022) (“TIAA”), TotalEnergies SE (Apr. 1, 2022) (“TotalEnergies”), and Vereniging Effecten Uitgevende Ondernemingen (Mar. 30, 2022) (“VEUO”). Additionally, one commenter recommended exempting from the amendments repurchases of an issuer's preferred stock. See letter from Vicki Owen (Jan. 19, 2023). 122 See, e.g., letters from ABA Committee, CBA, Cravath, NYC Bar, NYSE, SIFMA II, Sullivan, TotalEnergies, and VEUO. 123 See, e.g., letters from Better Markets I, BrilLiquid, CFA Institute, CII, Hecht, ICGN, and Roosevelt. 124 See, e.g., letters from SIFMA II, TotalEnergies, and VEUO. One commenter asserted that applying the amendments to FPIs would discourage foreign companies from listing on U.S. exchanges. 125 Other commenters requested that the Commission clarify that the final amendments would not apply to Multijurisdictional Disclosure System (“MJDS”) filers. 126 Some commenters recommended that, at a minimum, FPIs that are required to provide share repurchase information in their home country disclosures, and include that information in their filings on Form 6-K, should be exempt from the proposed quantitative daily disclosure amendments. 127 Some of these commenters indicated that FPIs should not be required to disclose the total number of shares repurchased in their home countries in reliance on the safe harbor in Rule 10b-18 nor the total number of shares purchased pursuant to a plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) because that information is not likely to provide any meaningful information to U.S. investors. 128 125 See letter from NYC Bar. 126 See, e.g., letters from ABA Committee, BCE Inc. (Mar. 30, 2022), CBA, Jones Day, and Sullivan. 127 See, e.g., letters from SIFMA II, Sullivan, and VEUO. 128 See, e.g., letters from SIFMA II and VEUO. Most commenters that discussed the issue asserted that the final amendments should not provide an exemption to smaller issuers. 129 Nonetheless, one of these commenters recommended that, if the Commission adopts a next-day reporting requirement, it should provide smaller reporting companies (“SRCs”) 130 with additional time to furnish their Form SR. 131 Another commenter suggested that smaller companies should have simplified reporting requirements, such that they not be required to provide their Form SR as frequently as other issuers. 132 One commenter recommended that SRCs' repurchase reporting threshold be based on a five percent volume trigger. 133 Other commenters, however, asserted that applying the amendments to smaller issuers would be onerous and unnecessary 134 and would place an increased burden 135 on those issuers. 129 See, e.g., letters from ABA Committee, Better Markets I, BrilLiquid, CFA Institute, Cravath, ICGN, and Hecht. 130 “Smaller reporting company” is defined in Securities Act Rule 405 and 17 CFR 240.12b-2 as an issuer that is not an investment company, an asset-backed issuer (as defined in 17 CFR 229.1101), or a majority-owned subsidiary of a parent that is not an SRC and that: (1) Had a public float of less than $250 million; or (2) had annual revenues of less than $100 million and either: (a) no public float; or (b) a public float of less than $700 million. 131 See letter from Cravath. 132 See letter from Hecht. 133 See letter from ABA Committee (explaining that “[s]etting the Form 8-K threshold at 5% of the total shares outstanding would be consistent with how SRCs are treated with respect to disclosures under current Item 3.02 for dilutive issuances in private transactions,” and that “this accommodation would not result in a meaningful loss of information to investors”). 134 See letter from ACCO. 135 See letter from Profs. Lewis and White. Additionally, one commenter recommended exempting issuers without an established market for their securities because, in its view, investors receive little informational value from this disclosure and there is minimal risk of opportunistic repurchases in such cases. 136 Another commenter recommended exempting publicly traded government contractor companies. 137 A few commenters suggested exempting regulated banking institutions from the proposed amendments because those issuers are already required to disclose their regulatory capital requirements and capital planning process, so the repurchase information in the proposed amendments would not be necessary for investors. 138 One of these commenters acknowledged that the information required by banking regulators “does not directly align with the share-repurchase-specific disclosure the SEC is proposing to require,” though the commenter also asserted that such information “nevertheless provides investors with insights into firms' capital planning processes and actions.” 139 136 See letter from Publix Super Markets, Inc. (Jan. 10, 2023) (“Publix”). The commenter also notes that the Inflation Reduction Act exempts such companies from the excise tax and, therefore, asserts that a similar exemption should apply here. 137 See letter from PSC. The commenter stated that that the proposed daily reporting requirements would increase costs and offer no identifiable benefit to publicly traded government contractor companies because those firms are able to do business only with the government, so their costs must be covered by their government customers. As a result, adding the daily disclosure requirements to these firms would make them less competitive and force them out of the public markets. 138 See, e.g., letters from BPI & Amer. Bankers Assoc. and IBC. 139 See letter from BPI & Amer. Bankers Assoc. Some commenters asserted that Listed Closed-End Funds 140 should be exempt from the proposed quantitative daily disclosure amendments because, given the way the funds are structured, they believe that the concerns motivating the proposal are absent. Other commenters disagreed and asserted that Listed Closed-End Funds should be subject to the final rule. 141 In response to a request for comment about whether to exempt, among other issuers, Listed Closed-End Funds from the structured data requirement, one commenter suggested that there is a link between having a lower public float and the likelihood of market manipulation. 142 Another commenter stated that many Listed Closed-End Funds repurchase shares when the market price is below net asset value (“NAV”) and/or to increase NAV for remaining shareholders, and that given the close relationship between share purchases and NAV, it is arguably more important for Listed Closed-End Funds to disclose information regarding their planned and actual repurchase activity. 143 Other commenters indicated that the proposed amendments should exempt trades associated with Rule 10b5-1 plans 144 and purchases made in reliance on the Rule 10b-18 safe harbor. 145 140 See, e.g., letters from ICI I and TIAA (suggesting that, because executive compensation is generally not tied to share price among closed-end funds, these issuers generally have little or no incentive to misuse share repurchases). See also letter from Investment Company Institute (Jan. 11, 2023) (asserting that, because the Inflation Reduction Act exempted Listed Closed-End Funds, the final amendments should do so too). Some commenters suggested that the Commission should also exempt “non-listed funds” from the proposed amendments. See letters from ADISA and IPA. Both the proposed and final amendments, however, would only apply to Listed Closed-End Funds. 141 See letters from CFA Institute, XBRL US (Mar. 31, 2022) (“XBRL US”), BrilLiquid, Hecht, and ICGN. 142 See letter from XBRL US. 143 See letter from CFA Institute. 144 See letter from PNC. 145 See, e.g., letters from HP and SCG. c. Comments on Repurchases Intended To Satisfy Rule 10b5-1(c) and Intended To Qualify for the Rule 10b-18 Safe Harbor Some commenters generally supported the requirements to disclose whether repurchases were made pursuant to a Rule 10b5-1(c) plan, as proposed. 146 One commenter recommended requiring additional disclosure regarding an issuer's Rule 10b5-1(c) plan, including information on adoption, modification, suspension, or termination of the plan; the maximum number of shares planned for sale under the plan; and any suspensions or terminations of a planned repurchase pursuant to such a plan. 147 Some commenters supported the proposed disclosures related to the Rule 10b-18 safe harbor, but recommended that the Commission go farther by repealing Rule 10b-18 and replacing it with bright-line limits. 148 Another commenter generally supported the proposed Rules 10b5-1(c) and 10b-18 disclosures, but indicated that they should not be applied to FPIs. 149 146 See, e.g., letters from CFA Institute, CII, and SIFMA II. 147 See letter from CFA Institute. 148 See, e.g., letters from AFREF et al.; CFA Institute; CII; Oxfam; Prof. Palladino; and William Lazonick & Ken Jacobson, Academic-Industry Research Network (Apr. 1, 2022) (“Lazonick & Jacobson”). 149 See letter from SIFMA II. Other commenters opposed generally the requirements to disclose repurchases intended to satisfy Rule 10b5-1(c) and intended to qualify for the Rule 10b-18 safe harbor. 150 One commenter disagreed specifically with proposed Item 703(c)(2)(iii) and (c)(3)(v), which would require disclosure of the terminations of Rule 10b5-1 trading plans, or determinations not to make further purchases under a plan, because that could lead to unfounded speculation about mergers and acquisitions or other activities. 151 Another commenter asserted that requiring disclosure as to whether share repurchases were made in reliance on the Rule 10b-18 safe harbor could cause a negative inference against any issuer not relying on the safe harbor. 152 150 See, e.g., letters from Cravath, Dow, Maryland Bar, and Sullivan. 151 See letter from Sullivan. 152 See letter from Maryland Bar. d. Comments Concerning Requests for Clarification Some commenters asked the Commission to clarify certain aspects of the proposed quantitative daily disclosures on Form SR. 153 One of these commenters asked the Commission to provide a more precise definition of “share repurchase program” because the term is not currently “a legal term of art,” so different issuers may use the term differently. 154 Other commenters claimed that the proposed amendments were ambiguous as to when a transaction would be considered “executed,” particularly in the context of ASRs. 155 One commenter recommended that the Commission define the terms, “business day” and “before the end,” used in the proposed amendments establishing the Form SR deadline. 156 Another commenter requested that the final amendments clarify whether withhold-to-cover shares would be encompassed by the rule and recommended that they not be included under any final rule. 157 Some commenters claimed that an end of next business day deadline would prejudice issuers on the west coast, 158 with one of the commenters pointing out that “those making filings on Form 4 159 are provided not only with two business days to report insider transactions that are significantly less frequent than those which would be reported under Form SR, but such filers are given until 10 p.m. Eastern Time to file.” 160 153 See, e.g., letters from Chamber II, Bishop, Cravath, DLA Piper, FedEx, HudsonWest LLC (Mar. 31, 2022) (“HudsonWest”), Simpson Thacher, Thomas Nash (Oct. 12, 2022) (“Nash”), and Wilson Sonsini. 154 See letter from Cravath. The commenter suggested that share repurchase program be defined as “cash purchases by issuers in the market for their own account and not for the purpose of immediately delivering those shares to a third party in satisfaction of a pre-existing obligation.” Further, the commenter provided certain items that should fall outside the definition, including: (1) arrangements to acquire shares in the market to deliver to shareholders participating in dividend reinvestment plans, to employees participating in employee share purchase programs, or to 401(k) or other retirement accounts in satisfaction of “stock match” commitments; (2) arrangements to facilitate the operation of employee equity incentive plans; (3) self-tender offers; (4) net share settlement and other transactions where a holder forfeits an entitlement to an issuer's shares ( e.g., in connection with an option, or upon separation); and (5) cash settlement of transactions that reference an issuer's shares, such as derivative transactions. 155 See, e.g., letters from Chamber II, Cravath, DLA Piper, FedEx, HudsonWest, Simpson Thacher, and Wilson Sonsini. 156 See letter from Bishop. 157 See letter from Nash. 158 See, e.g., letters from Chevron and HP. 159 17 CFR 249.104. 160 See letter from HP. e. Other Comments A number of commenters asked the Commission to adopt additional Form SR disclosure requirements that the Commission did not propose, including the number of shares outstanding following the reported transaction, 161 the number of shares remaining to be purchased pursuant to the current repurchase plan, 162 and the highest and lowest price paid per share. 163 A form letter submitted by many commenters recommended replacing the Rule 10b-18 safe harbor with a bright-line rule and making stock repurchases beyond the bright-line rule unlawful. 164 The commenters also suggested a prohibition on trading by insiders during repurchase announcements and executions of repurchase trades within at least ten days of these events. 161 See, e.g., letters from AFREF et al. and Pentacoff. 162 See letter from CFA Institute. 163 See letter from AFREF et al. 164 See letter from Form Letter A. A few commenters suggested alternatives for the proposed Form SR disclosures, such as requiring the information to be disclosed as part of Item 703 of Regulation S-K, 165 or providing interpretive guidance to elicit the disclosure instead of revising the Commission's rules. 166 Some commenters recommended that, instead of the proposed quantitative daily share repurchase disclosures, the Commission should require disclosure about the effect of share repurchases on executive compensation reported under 17 CFR 229.402 (Item 402 of Regulation S-K). 167 One commenter asserted that the effect of share repurchases on executive compensation pertains to an issuer's corporate governance and should be resolved by shareholders instead of the Commission. 168 165 See letter from SIFMA II. 166 See letter from Profs. Lewis and White. 167 See, e.g., letters from Maryland Bar and Profs. Lewis and White. 168 See letter from PA Chamber. With respect to the proposed requirement that Form SR disclose the total number of shares purchased in reliance on Rule 10b-18, some commenters suggested that issuers should only be required to disclose whether a purchase “was intended to comply” with that safe harbor due to interpretive legal questions and the speed at which market quotations of stock prices can change. 169 Some commenters asked the Commission to include a phase-in period of nine to 12 months for any final amendments that the Commission may adopt. 170 169 See, e.g., letters from SIFMA II and Sullivan. 170 See, e.g., SIFMA II, Sullivan, and Wilson Sonsini. 3. Final Amendments We continue to believe that disclosure of issuers' total repurchases made each day would benefit investors and markets. The final amendments require the same additional detail regarding an issuer's daily repurchase activity, as proposed. Moreover, to make this information readily available for analysis, the final amendments require that the share repurchase information that is disclosed be reported using Inline XBRL, also as proposed. However, although the final amendments require daily repurchase disclosure, as proposed, the final amendments require a different deadline and manner of disclosure. In response to commenters' objections, the final amendments do not require issuers to provide their daily repurchase disclosure one business day after execution of their share repurchase order. 171 Rather, in a change from the proposal, the final amendments require: 171 As discussed above, see supra Section III.A.2.d., a number of commenters requested that we clarify certain aspects of the proposed amendments. See, e.g., letters from Chamber II, Bishop, Cravath, DLA Piper, FedEx, HudsonWest, Nash, Simpson Thacher, and Wilson Sonsini. As a result of the changes from the proposed amendments to the final amendments, most of these requests are no longer applicable. Those clarification requests still applicable for the final amendments are addressed in the appropriate places in this release. • Corporate issuers that file on domestic forms to disclose the total repurchases made each day for the quarter in an exhibit to their Form 10-Q and Form 10-K (for their fourth fiscal quarter); • Listed Closed-End Funds to disclose daily quantitative repurchase data in their semi-annual and annual reports on Form N-CSR; and • FPIs reporting on the FPI forms to disclose daily quantitative repurchase data at the end of every quarter in new Form F-SR, 172 which will be due 45 days after the end of each of the issuer's fiscal quarters. 173 172 See supra note 24. 173 The final amendments adopt new Rule 13a-21, as proposed, which requires applicable FPIs to file a Form F-SR. After considering the comments, we believe that providing the same detail as was proposed but on a less frequent basis would avoid many of the costs that commenters noted while still providing important disclosures that address the informational deficiencies in current reporting that we have identified. Accordingly, the final amendments require issuers to disclose their daily quantitative share repurchase information periodically in quarterly or semi-annual reports (“periodic reporting”) instead of requiring issuers to disclose it on a daily basis, as proposed. Although periodic reporting of daily quantitative data will provide less frequent repurchase disclosures to investors than would daily reporting of that data, periodic reporting will still provide investors with most of the benefits that daily reporting would offer, but at a lower cost to issuers. In fact, the costs to issuers may be only incremental because issuers are already reporting share repurchases by month in their periodic reports. Investors will be able to use the granular daily quantitative data to evaluate an issuer's repurchases in more detail, including in the context of other point-in-time disclosures, such as executive compensation and financial statement disclosures. While this periodic reporting will, in most cases, result in daily quantitative repurchase data that are available to investors later than was proposed, investors may well find the disclosure more meaningful when considered as part of the overall pattern of the issuer's repurchases, because they will be able to evaluate the efficiency of the share repurchases based on when the issuer repurchased its shares and the issuer's stated reasons for doing so. Moreover, this periodic, rather than daily, reporting should mitigate any concerns raised by commenters about the potential misinterpretation of an issuer's day-to-day changes in trading activity 174 that could cause unjustified stock price volatility 175 or disrupt confidential merger or acquisition discussions. 176 Additionally, while some commenters expressed concern that investors might use daily quantitative disclosure data to gain insight into or identify the issuer's trading strategies, 177 as other commenters observed, the move to periodic reporting should substantially mitigate any such concern. 178 174 See, e.g., letters from Business Roundtable, Davis Polk, Dow, FedEx, Home Depot, Kaswell, Profs. Lewis and White, NAM, PNC, Quest, Shearman, SIFMA II, Simpson Thacher, T. Rowe Price, Wilson Sonsini, and Vistra. 175 See, e.g., letters from Cravath, Davis Polk, Profs. Lewis and White, and SCG. 176 See, e.g., letters from Davis Polk, PNC, SIFMA II, and Sullivan. 177 See, e.g., letters from Home Depot and PNC. 178 See, e.g., letters from Cravath and Davis Polk. We acknowledge, as a commenter observed, that periodic reporting will provide information to the market more slowly than the two-business day maximum delay associated with insider reporting of changes in beneficial ownership on Form 4. 179 While both issuer and insider trades may reflect managers' views of an issuer's value, we recognize that the much greater frequency of issuer trades pursuant to repurchase plans relative to trades by individual insiders likely would result in considerably more frequent reporting by issuers, and thus in greater costs than those incurred by insiders reporting their transactions on Form 4. In addition, because of this greater frequency of trading, there would be a greater risk (as compared to insider transactions) that daily reporting would allow other market participants to trade strategically in response to issuer disclosures and greater potential harm to investors as a result. Further, we believe that even with periodic reporting investors will still be able to use periodic reporting of daily repurchases to identify potentially opportunistic behavior, and that issuers will take into account that likelihood when determining their trading behavior. 179 See letter from Roosevelt (asserting that the Commission should adopt daily reporting “for similar reasons that Form 4 requires daily disclosure”). The final amendments require daily share repurchase disclosure on a quarterly basis in Forms 10-Q and 10-K (for the issuer's fourth fiscal quarter) for corporate issuers reporting on domestic forms and on a semi-annual basis in Form N-CSR for Listed Closed-End Funds. Quantitative share repurchase disclosures, aggregated on a monthly basis, are already required in those forms. 180 The final amendments require the disclosure of additional detail with respect to the already-reported share repurchases. Therefore, investors should be familiar with looking to these filings for repurchase information. Moreover, this change should lessen the burden for issuers compared with the proposal because they are accustomed to providing repurchase information in these periodic filings. As one commenter noted, it would be useful for the issuer's transactions to be disclosed in periodic reports for “the ease of use and access to information for those who access EDGAR using the SEC website.” 181 180 Due to the new daily quantitative repurchase disclosure requirements, we are eliminating the current requirement to provide quantitative share repurchase disclosures on a monthly basis because it would be redundant. See infra note 218 and accompanying text. 181 See letter from Anthem Advisors. Listed Closed-End Funds will be required to provide their daily share repurchase disclosures on Form N-CSR on a semi-annual basis. Like Forms 10-Q and 10-K, Form N-CSR currently requires the disclosure of quantitative share repurchase disclosures on a semi-annual basis so investors should likewise be familiar with looking in this filing for repurchase information. We are subjecting Listed Closed-End Funds to the final amendments because, although not all of the motivations for corporate issuer share repurchases apply to them due to differences in the business model and organizational structure of a fund as compared to a corporate issuer, investors in Listed Closed-End Funds also will benefit from the opportunity to evaluate the purposes, impacts, and efficiency of share repurchases and to understand the impact of such activity on the value of their investments. As one commenter observed in opposing an exemption for Listed Closed-End Funds, this interest may be particularly strong given the close relationship between share repurchases and NAV, which the commenter believed made it arguably more important for Listed Closed-End Funds to disclose quantitative and qualitative information regarding planned and actual repurchases. 182 Relatedly, absent the additional information required by the final amendments—including daily quantitative repurchase data—it would be difficult for investors in Listed Closed-End Funds to distinguish between price movements that are attributable to repurchase activity as opposed to other market activity impacting share price. 183 Further, as noted by another commenter, disclosure may be of particular importance for issuers with lower floats, such as Listed Closed-End Funds, because such issuers may face a greater likelihood that repurchases will have a significant effect on share price. 184 182 See Letter from CFA Institute. 183 See Proposing Release, supra note 2, at 8460-8461. 184 See letter from XBRL US. The final amendments will require FPIs that report using the FPI forms to provide disclosure of daily repurchase data on new Form F-SR, which is to be filed with the Commission quarterly. The Form F-SR will be due 45 days after the end of the FPI's fiscal quarter to be consistent with the latest deadline for a quarterly report on Form 10-Q. 185 FPIs that report on the FPI forms do not have a quarterly reporting obligation under the Exchange Act and generally provide repurchase disclosure only in their annual report on Form 20-F. Our reasons for adopting quarterly reporting of daily repurchases for FPIs reporting on the FPI forms are the same as for corporate issuers reporting on domestic forms. 186 In addition, similar to the amendments we are adopting to our domestic forms, we are eliminating the requirement in Form 20-F to provide quantitative share repurchase disclosures on a monthly basis. 187 185 We are requiring a deadline for the Form F-SR of 45 days after the end of the fiscal quarter for all four quarters, including the final quarter of the fiscal year. While domestic corporate filers receive additional time to file a Form 10-K following the final quarter of their fiscal year, relative to the time for other quarterly filings, this extended period is due to the additional materials that must be included in the Form 10-K. Since no such difference would exist for the fourth-quarter Form F-SR, we are requiring a uniform filing deadline after each quarter. 186 See letter from CII (stating that issuers that file on domestic forms and FPIs that file on the FPI forms should be subject to the same filing obligations). In addition, because FPIs are more similar to corporate issuers filing on domestic forms than Listed Closed-End Funds, we are keeping the disclosure frequency consistent with such corporate issuers. Similarly, we do not believe that semi-annual reporting of daily repurchase information would be appropriate for FPIs that do not file on domestic forms for the same reasons. Therefore, we believe that corporate issuers that file on domestic forms and FPIs that file on the FPI forms should be subject to the same filing obligations. 187 Form F-SR contains an instruction stating that the information reported on the form relates to the issuer's securities in ordinary share form, whether the issuer has repurchased the shares itself or depositary receipts that represent the shares. When it adopted the Item 703 disclosure requirements in 2003, the Commission stated that it expected the Item 703 disclosures to provide investors and the marketplace with important information regarding an issuer's repurchase activity that would allow them to assess the impact of an issuer's share repurchases on the issuer's stock price, similar to periodic disclosure of issuer earnings and dividend payouts. 188 Disclosure of a monthly aggregation of repurchases, however, does not always allow investors to assess whether, for example, the bulk of an issuer's repurchases were made in advance of a specific date, such as the date on which incentive targets for compensatory awards are measured or the day material nonpublic information is released to the public. 188 See 2003 Adopting Release, supra note 5, at 64962. We disagree with the commenter who asserted that “the Commission's analysis . . . does not sufficiently explain its apparent reversal of the prior position that the appropriate way to promote efficiency, competition, and capital formation is to `minimize the market impact of the issuer's repurchases, thereby allowing the market to establish a security's price based on independent market forces without undue influence by the issuer' ” and that this is not accomplished by “highlighting them in daily disclosures.” See letter from Chamber II. In 2003, the Commission stated that “Rule 10b-18's safe harbor conditions are designed to minimize the market impact of the issuer's repurchases.” See 2003 Adopting Release, supra note 5. This statement was not in reference to the monthly repurchase disclosures the Commission adopted at the same time in Item 703, which the Commission stated were “intended to enhance the transparency of issuer repurchases.” Id. As noted throughout this release, the amendments we are adopting are similarly intended to enhance the transparency of issuer repurchases. The Commission proposed additional share repurchase disclosures to provide investors with further insight into the details of an issuer's share repurchases, which when combined with other information available about the issuer, could diminish informational asymmetry, enhance transparency, and enable investors to undertake a more thorough assessment of issuer share repurchases. 189 Investors could use this more detailed disclosure to monitor and evaluate issuer share repurchases and their effects on the market for the issuer's securities. 189 See Proposing Release, supra note 2, at 8446. In some circumstances, such as when repurchases may affect the value of compensatory awards to executives or the amount for which executives can sell such awards, issuers may have incentives to engage in share repurchases for reasons other than to increase or signal the issuer's fundamental value. In addition, issuers are repurchasing their own securities, so they will typically have significantly more, as well as more detailed, information about the issuer and its future prospects. Thus, as we have described above, investors will benefit from having additional disclosures that will enable them to evaluate the efficiency of share repurchases or determine a pattern of when repurchases could be timed to affect compensation or to benefit from material nonpublic information, among other possible uses of daily repurchase data, thereby increasing investor confidence. We disagree with commenters who asserted that we have not identified a “market failure” that would justify the additional disclosures. 190 In particular, these commenters asserted that there is no market failure because information asymmetry is advantageous to markets in that it incentivizes some market actors to expend resources developing information that would be relevant to an issuer's share price. 191 We disagree with these arguments. As the sources cited by the commenters themselves point out, [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2023-09965. Public record. Not legal advice.