SEC addresses share buyback disclosures, insider trading rules

By Ken Tysiac

Share buyback disclosures would be enhanced and protections against insider trading would be strengthened under separate proposals the SEC issued Wednesday.

Under the proposed share buyback amendments, an issuer would be required to provide a new Form SR before the end of the first business day after the issuer executes a share repurchase. Form SR would require disclosures identifying:

  • The class of securities purchased;
  • The total amount purchased;
  • The average price paid; and
  • The aggregate total amount purchased on the open market in reliance on the safe harbor in Exchange Act Rule 10b-18 or pursuant to a plan that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c).

Periodic disclosure requirements regarding repurchases of an issuer's equity securities also would be enhanced. The proposal would require an issuer to disclose:

  • The objective or rationale for the share repurchases and the process or criteria used to determine the repurchase amounts;
  • Any policies and procedures relating to purchases and sales of the issuer's securities by its officers and directors during a repurchase program, including any restriction on such transactions; and
  • Whether the issuer is making repurchases pursuant to a plan that it intends to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) and/or the conditions of the Exchange Act Rule 10b-18 nonexclusive safe harbor.

"Share buybacks have become a significant component of how public issuers return capital to shareholders," SEC Chairman Gary Gensler said in a news release. "I think we can lessen the information asymmetries between issuers and investors through enhanced timeliness and granularity of disclosures that today's proposal would provide."

The SEC will accept comments for 45 days after the proposal is published in the Federal Register.

Insider trading proposal

Proposed amendments to Rule 10b5-1 that were issued Wednesday are designed to enhance disclosure requirements and investor protections against insider trading.

Rule 10b5-1(c) provides an affirmative defense to insider trading for parties that frequently have access to material nonpublic information, including corporate officers, directors, and issuers.

"Over the past two decades, we've heard concerns about gaps in Rule 10b5-1 — gaps that today's proposals would help fill," Gensler said.

The proposed amendments would update the requirements for the affirmative defense and would require directors and officers to furnish written certifications that they are not aware of any material nonpublic information when they enter into the plans. The existing good-faith requirement for trading under Rule 10b5-1 plans also would be expanded.

In addition, the proposed amendments would elicit more comprehensive disclosure about issuers' policies and procedures related to insider trading and their practices around the timing of options grants and the release of material nonpublic information.

The comment period will remain open for 45 days after publication in the Federal Register.

— To comment on this article or to suggest an idea for another article, contact Ken Tysiac at

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