Document ID: SEC-2023-0570-0001
Agency: sec
Document Type: Rule
Title: Share Repurchase Disclosure Modernization
Posted Date: 2023-06-01T04:00Z

[Federal Register Volume 88, Number 105 (Thursday, June 1, 2023)]
[Rules and Regulations]
[Pages 36002-36063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09965]

[[Page 36001]]

Vol. 88

Thursday,

No. 105

June 1, 2023

Part II

Securities and Exchange Commission

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17 CFR Parts 229, 232, 240, et al.

Share Repurchase Disclosure Modernization; Final Rule

  Federal Register / Vol. 88 , No. 105 / Thursday, June 1, 2023 / Rules 
and Regulations  

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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.

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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:
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    \1\ 15 U.S.C. 78a et seq.

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          Commission reference                CFR citation (17 CFR)
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Regulation S-K:
    Items 10 through 1305..............  Sec.  Sec.   229.10 through
                                          229.1305.
    Item 408...........................  Sec.   229.408.
    Item 601...........................  Sec.   229.601.
    Item 703...........................  Sec.   229.703.
Regulation S-T:
    Rules 10 through 903...............  Sec.  Sec.   232.10 through
                                          232.903.
    Rule 405...........................  Sec.   232.405.
Securities Exchange Act of 1934
 (``Exchange Act''): \1\
    Rule 13a-21........................  Sec.   240.13a-21.
    Form F-SR..........................  ...............................
    Form 20-F..........................  Sec.   249.220f.
    Form 10-Q..........................  Sec.   249.308a.
    Form 10-K..........................  Sec.   249.310.
    Form N-CSR.........................  Sec.  Sec.   249.331 and
                                          274.128.
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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

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    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. 781 (``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:
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    \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.
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     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:
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    \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.
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     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

[[Page 36004]]

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\
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    \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'').
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    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\
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    \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.
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    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\
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    \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.
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    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\
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    \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.
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    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\
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    \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.
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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

[[Page 36005]]

     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.
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    \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.
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    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.
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    \25\ See infra note 322 and accompanying text.
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    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.
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    \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.
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    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 Bonaim[eacute], A.A. & Kahle, K.M., Share Repurchases, 
in Handbook of Corporate Finance (B. Espen Eckbo ed., forthcoming 
2023) (``Bonaim[eacute] 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 Bonaim[eacute] 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'').

---------------------------------------------------------------------------

[[Page 36006]]

    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,

[[Page 36007]]

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

[[Page 36008]]

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

[[Page 36009]]

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 Bonaim[eacute], 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) (``Bonaim[eacute] 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
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    \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

[[Page 36010]]

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\
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    \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\
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    \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

[[Page 36011]]

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\
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    \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

[[Page 36012]]

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

[[Page 36013]]

(``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

[[Page 36014]]

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

[[Page 36015]]

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

[[Page 36016]]

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, informational asymmetries are not 
necessary to incentivize the production of information.\192\ In the 
case of repurchases, relevant information about stock repurchases is 
often nonpublic, and thus not typically discoverable by third parties, 
including investors, who would benefit from the additional information 
conveyed by daily repurchase disclosures. We discuss in more detail the 
market failures addressed by the amendments in the Economic Analysis 
section, below.\193\
---------------------------------------------------------------------------

    \190\ See, e.g., letters from Chamber II and Profs. Lewis and 
White.
    \191\ Id.
    \192\ See Grossman, S.J. & Stiglitz, J.E., On the Impossibility 
of Informationally Efficient Markets, 70 Am. Econ. Rev. 393, 404 
(1980) (noting that there is also an incentive to acquire 
information if ``no one is informed'').
    \193\ See infra Section V.B.1.
---------------------------------------------------------------------------

    One commenter also asserted that no amendments were necessary 
because investors can already glean all necessary information from 
existing filings, such as through quarterly filings, mandatory 
disclosures of material new repurchase plans, or potential voluntary 
disclosures of data issuers deem material to investors.\194\ For 
example, the commenter noted that investors can likely infer instances 
when repurchases have helped an issuer hit an EPS target because 
quarterly filings will reveal aggregate repurchases over the quarter as 
well as earnings.\195\
---------------------------------------------------------------------------

    \194\ See letter from Profs. Lewis and White.
    \195\ Id.
---------------------------------------------------------------------------

    While we agree these kinds of informed conclusions based on 
existing quarterly data are possible, existing disclosures are 
inadequate to provide investors with the information needed to fully 
understand the actual impact of a repurchase. Data on daily purchases 
are more informative, and so will enable more accurate assessments of 
the motives for repurchases. For example, repurchases conducted in the 
days immediately before the end of a fiscal quarter, at a time when the 
issuer's managers are very likely to know that the issuer will miss an 
EPS target, would suggest that the repurchase likely does not fully 
signal the issuer's fundamental value, in a way that would not be the 
case if such repurchases were conducted in an equal amount each day of 
the quarter. Monthly aggregates also are unlikely to consistently 
reveal whether repurchases occurred before or after award grants or 
trades by executives, which could similarly signal that the repurchase 
was, in part, motivated by purposes other than shareholder value.\196\
---------------------------------------------------------------------------

    \196\ For this reason, we also disagree with the commenter 
suggestion that we could have replaced disclosure of daily 
repurchase data with a requirement that the issuer discuss the 
impact repurchases may have had on managers' ability to reach 
earnings per share targets in its Compensation Discussion and 
Analysis (``CD&A'') required pursuant to 17 CFR 229.402(b) (Item 
402(b) of Regulation S-K). See id. Such a discussion would not allow 
investors to identify which repurchases may have been affected by 
managers' incentives, and would not account for other avenues 
through which repurchases may affect compensation, such as by 
increasing stock prices shortly before a manager sells equity. 
Finally, this approach would also fail to identify instances in 
which issuers or their managers are driven by other concerns, such 
as internal EPS targets that do not affect compensation but instead 
affect reputation, retention, or relationships with creditors.
---------------------------------------------------------------------------

    One commenter suggested that the amendments are not needed when the 
issuer's trades would qualify for a safe harbor provision of Rule 10b5-
1.\197\ Instead, we think that the concerns that justify disclosure 
apply fully in that setting. An issuer's use of a Rule 10b5-1 trading 
plan would not, for example, affect executives' ability to time trades

[[Page 36017]]

to profit from repurchases. In addition, because there is no required 
cooling-off period for issuers, there is an increased risk that an 
issuer could adopt and then begin trading under a Rule 10b5-1 trading 
plan at a time when it may be aware of material nonpublic 
information.\198\ Thus, additional disclosure (including whether the 
repurchase was intended to qualify for the affirmative defense under 
Rule 10b5-1) is necessary for investors to evaluate the efficiency and 
impacts of a repurchase.\199\
---------------------------------------------------------------------------

    \197\ See letter from Cravath.
    \198\ See Rule 10b5-1 Adopting Release, supra note 18, at 80369. 
In the Rule 10b5-1 Adopting Release, the Commission did not adopt a 
cooling-off period for issuers, stating that ``further consideration 
of potential application of a cooling-off period to the issuer is 
warranted.'' Id. at 80371-80372. Please see the discussion of new 
Item 408(d), infra Section III.D.
    \199\ For similar reasons, we disagree with the commenters who 
stated that compliance with Rule 10b-18 would make the proposed 
daily repurchase disclosures unnecessary. See letters from HP and 
SCG. As we discuss below in this section, whether a trade is 
intended to qualify for the non-exclusive safe harbor of Rule 10b-18 
may help investors to understand the efficiency of a given 
repurchase. In addition, the fact that a repurchase is intended to 
qualify for the safe harbor does not significantly affect an 
executive's ability to time a personal trade to profit from a 
repurchase.
---------------------------------------------------------------------------

    We also disagree with the commenter who asserted that to the extent 
managers benefit from repurchases through an increased share price, 
this increase also benefits other existing shareholders, and so no 
disclosure is needed.\200\ Because managers can benefit from 
controlling the timing or volume of repurchases, it is more difficult 
for investors to interpret the extent to which repurchases increase or 
signal the issuer's fundamental value. Similarly, issuers may take 
actions to improve the returns on repurchases, such as real earnings 
management or repurchases while aware of material nonpublic 
information, that may benefit some existing shareholders, but at the 
potential expense of long-term liquidity and investor confidence.\201\ 
Thus, notwithstanding that there may be some investors who benefit in 
these scenarios, daily repurchase disclosure is necessary to protect 
all investors and the efficient operation of securities markets because 
daily data, in combination with other data, would allow investors to 
infer when repurchases may have been timed to benefit managers or 
otherwise at the expense of some investors.
---------------------------------------------------------------------------

    \200\ See letter from Maryland Bar.
    \201\ See, e.g., Cooper, L.A., Downes, J.F., and Rao R.P., Short 
term real earnings management prior to stock repurchases, 50 Rev. 
Quant. Fin. & Acct. 95 (2018) (reporting that managers use inventory 
and discretionary expenses, among other items, to manipulate 
reported earnings in advance of repurchases).
---------------------------------------------------------------------------

    For similar reasons, we disagree with that commenter's request that 
we limit new disclosures to discussion about the effects of repurchases 
on an executive's compensation.\202\ While such discussion might be 
generally informative about whether an issuer's repurchases may have 
been affected by managerial incentives, it would not reveal which 
particular repurchases were so affected, and would not address issuer 
efforts to achieve particular accounting targets for reasons unrelated 
to executive compensation, such as promotion, retention, or creditor 
preferences.
---------------------------------------------------------------------------

    \202\ See letter from Maryland Bar.
---------------------------------------------------------------------------

    Further, we disagree with the suggestion by some commenters that we 
abandon or delay the amendments because of the recently-enacted tax on 
certain share repurchases,\203\ because we expect that the tax will not 
meaningfully affect the rationales for the final amendments. As we 
describe in more detail below,\204\ we acknowledge that it is possible 
that the new one percent tax on some repurchases will reduce annual 
repurchases from their current volume of roughly $950 billion,\205\ 
although some indications are to the contrary.\206\ While any reduction 
in repurchase activity would potentially diminish the costs and 
benefits of the final amendments, given the vast volume of current 
repurchases, we believe that that there will continue to be a 
compelling need for enhanced disclosure related to these transactions. 
Notwithstanding a commenter's suggestion that the tax would deter 
``opportunistic'' buybacks,\207\ to the extent that there are 
repurchases for which managerial self-interest plays some role, we do 
not expect the tax to have a significant effect on the intended 
benefits of the final amendments.\208\
---------------------------------------------------------------------------

    \203\ See, e.g., letters from Chamber III, Chamber V, and PSC.
    \204\ See infra Section V.A.2.
    \205\ See Section V.A.2 infra and note 384 and accompanying 
text.
    \206\ See Williams-Alvarez, J., The 1% Stock-Buyback Tax Hasn't 
Slowed Repurchases. A Proposed 4% Tax Might, Wall St. Journal, Mar. 
2, 2023 and Avi-Yonah, R.S., A Different Tax on Stock Buybacks, 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4301215 (Dec. 
13, 2022) (``[A] 1% tax on buybacks is unlikely to reduce 
buybacks.'').
    \207\ See letter from Chamber III.
    \208\ See Moore, supra note 34 (reporting that managerial 
benefit from repurchases is not sensitive to the cost of 
repurchasing).
---------------------------------------------------------------------------

    Although a number of commenters asserted that daily reporting of 
daily data would generally result in an overload of information for 
investors,\209\ our adoption of periodic reporting should significantly 
reduce these concerns, as some commenters noted.\210\ In any event, we 
disagree that information about issuers' daily trading will overload 
investors.\211\ Rather than overloading investors with superfluous 
data, the information required by the final amendments will provide 
them with additional insight into the precise timing of repurchases 
that they can use to evaluate the efficiency of and motives for the 
issuer's share repurchases in a way that is not possible to do with the 
current requirement to disclose monthly data.
---------------------------------------------------------------------------

    \209\ See, e.g., letters from Dow, Kirkland Ellis, NYSE, SCG, 
and Vistra.
    \210\ See, e.g., letters from Anthem Advisors, Cravath, and 
Jones Day.
    \211\ See letter from Roosevelt (stating that the daily 
repurchase disclosures would not create an overabundance of 
information for investors).
---------------------------------------------------------------------------

    We also disagree with commenters who asserted that more detailed 
information would harm smaller retail investors by making the 
information too disaggregated to easily parse.\212\ The daily data will 
be required to be tagged using Inline XBRL, so these investors and 
other market participants will be able to collate that daily data to 
another level of detail to suit their level of sophistication. In some 
instances, monthly data fail to reveal key details about repurchase 
activity, such as whether repurchases occur before or after release of 
material nonpublic information.
---------------------------------------------------------------------------

    \212\ 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.
---------------------------------------------------------------------------

    Furthermore, greater transparency ultimately benefits all 
investors. For example, newly available data may incentivize 
intermediaries, such as investment advisers, to develop the capacity to 
analyze the data and provide their analysis to retail or other 
clients.\213\ Additionally, to the extent that some traders may have 
greater capacity to quickly analyze information about daily 
repurchases,\214\ our adoption of periodic reporting should mitigate 
any such advantage by allowing for fewer arbitrage opportunities.
---------------------------------------------------------------------------

    \213\ Cf. letter from Profs. Lewis and White (arguing that 
information asymmetry incentivizes market actors to acquire 
information for use by others).
    \214\ 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.
---------------------------------------------------------------------------

    Relatedly, some commenters raised concerns that daily disclosures 
would result in disclosure of information that is not material to 
investors,\215\ or asked

[[Page 36018]]

the Commission to include a materiality standard in the final 
amendments.\216\ We considered, but rejected, suggestions by these 
commenters to require disclosure only of material daily repurchases, 
such as repurchases that in the daily aggregate represent one percent 
or more of the issuer's outstanding shares. As we have explained, we 
believe that in many cases it is not only the amount, but also the 
timing of, repurchases that makes them informative to investors. 
Assessments of materiality for every repurchase conducted by the issuer 
would add significant costs. Further, limiting disclosures to a volume 
threshold, such as relatively large aggregate daily purchases, whether 
a set one percent figure or otherwise, could encourage issuers that 
prefer to avoid disclosure to inefficiently divide their planned 
transactions over multiple days or weeks, as pointed out by one 
commenter.\217\
---------------------------------------------------------------------------

    \215\ See letter from Profs. Lewis and White.
    \216\ See, e.g., letters from Hecht and NASAA.
    \217\ See letter from SIFMA II (stating that issuers may limit 
their average daily trading volume to try to ensure that 
sophisticated investors view the daily trades as immaterial, even if 
a larger volume would be more beneficial to shareholders).
---------------------------------------------------------------------------

    We recognize that certain issuers could conduct a number of daily 
repurchases every quarter, which may result in lengthy additional 
disclosures in a filing. To address this concern, the final amendments 
require corporate issuers that report on Forms 10-Q and 10-K to file 
daily reporting data as an exhibit to their periodic reports instead of 
in the body of those reports. Listed Closed-End Funds will be required 
to provide their daily repurchase data in the body of Form N-CSR and 
FPIs that report on the FPI forms will be required to provide their 
daily repurchase data in the body of Form F-SR. Form N-CSR contains 
information on a range of specific topics (such as a fund's code of 
ethics or, in this case, repurchases) such that providing share 
repurchase disclosures in the body of the form presents fewer 
readability concerns. On the other hand, Form F-SR will be used 
exclusively to report daily repurchase data, so there is no concern 
that the daily repurchase data will obscure other disclosures in that 
form.
    In another change from the proposal, the final amendments will 
require the daily repurchase data to be filed instead of furnished. 
Because daily repurchase data will be provided on a quarterly or semi-
annual basis, depending on the status of the issuer, the liability 
concerns that may have been raised by a requirement to file daily 
repurchase data within the proposed one business day timeframe are 
alleviated. The issuer will have more time to obtain, verify, and 
compile the disclosure compared to the proposal. As a result, we find 
it appropriate for issuers to be subject to Exchange Act section 18 
liability for the new repurchase disclosure, as they are currently for 
filings under Item 703 of Regulation S-K, and the information will be 
deemed incorporated by reference into filings under the Securities Act, 
which will be subject to Securities Act section 11 liability.
    Additionally, the final amendments eliminate the requirement in 
current Item 703(a) of Regulation S-K that issuers disclose their 
monthly quantitative repurchase data in their periodic reports.\218\ 
Presently, Item 703 requires corporate issuers reporting on domestic 
forms to provide monthly quantitative repurchase data on a quarterly 
basis in their Form 10-Qs and Form 10-Ks (for the issuer's fourth 
fiscal quarter), Item 16E of Form 20-F requires FPIs to provide monthly 
repurchase data in their annual reports on Form 20-F, and Item 14 of 
Form N-CSR requires Listed Closed-End Funds to provide monthly 
repurchase data in their semi-annual reports on Form N-CSR. In light of 
the new requirements to disclose daily repurchase data, we no longer 
believe this information is necessary. To the extent that investors, 
market participants, and others are interested in monthly repurchase 
data, they will be able to collate that data themselves, including by 
using Inline XBRL.
---------------------------------------------------------------------------

    \218\ Additionally, the final amendments move much of disclosure 
in current Item 703(b) to new Item 703(a) and new Item 601(b)(26).
---------------------------------------------------------------------------

    Consistent with the proposal, the final amendments do not include 
any exemptions.\219\ We have not exempted any category of issuer 
because disclosure of daily repurchase data benefits all investors in 
issuers that conduct repurchases.\220\ Additionally, to the extent that 
certain issuers, such as SRCs, have relatively high information 
asymmetries, disclosure about their repurchases may be more informative 
to investors. Moreover, although some issuers may provide similar 
information to other regulators, requiring all issuers to comply with 
the final amendments facilitates investor access because the 
information will be disclosed in a common location. In the case of 
financial institutions, while one commenter asserted that capital 
regulations by other regulators would prevent the institutions from 
engaging in opportunistic repurchases,\221\ we are not aware of any 
specific regulations that would prevent executives at those 
institutions from profiting from repurchases, or that would limit 
repurchases at times the institution's managers are aware of material 
nonpublic information. We do not believe that any general insights into 
an issuer's capital planning that financial-institution regulations 
might offer will provide the level of detail investors would receive 
from disclosure of daily trade data and specific qualitative discussion 
of repurchase policies.
---------------------------------------------------------------------------

    \219\ MJDS filers currently do not provide repurchase disclosure 
analogous to Item 703 (for filers on the domestic forms) or Item 16E 
for foreign private issuers that report using Form 20-F. Consistent 
with that approach, we are not imposing the amended repurchase 
disclosure requirements on Canadian issuers that file using the MJDS 
because those issuers are subject to a separate reporting regime. 
Under the MJDS, eligible Canadian issuers may satisfy certain 
securities registration and reporting requirements of the Commission 
by providing disclosure documents prepared in accordance with the 
requirements of Canadian securities regulatory authorities. See 
Multijurisdictional Disclosure and Modifications to the Current 
Registration and Reporting System for Canadian Issuers, Release No. 
33-6902 (Jun. 21, 1991) [56 FR 30036 (July 1, 1991] (``MJDS 
Release'').
    \220\ As noted above, several commenters recommended that we 
exempt issuers conducting repurchases with respect to securities 
that are not traded on an exchange from the daily repurchase 
disclosures. See letters from Nareit and Publix. However, as 
discussed in Section V.D.3, such an exemption would deprive 
investors in these issuers of the informational benefits of the 
final amendments, which might be relatively more consequential for 
investors in issuers with a thin trading market or without a trading 
market that lack the price discovery from active trading. In 
addition, we note that these issuers are already required to provide 
share repurchase disclosures under existing Item 703.
    \221\ See letter from BPI & Amer. Bankers Assoc.
---------------------------------------------------------------------------

    Moreover, the commenter suggested that the final amendments would 
encourage dividend distributions instead of share repurchases as the 
preferred mechanism for returning capital to shareholders, which would 
tend to undermine banks' fiscal soundness and, the commenter suggests, 
be inconsistent with Federal Reserve policies, because dividends 
represent a more binding commitment of future resources.\222\ As with 
other issuers, we do not believe the amendments significantly affect 
the relative appeal of repurchases for financial institutions, and even 
if so, are also aware that financial institutions may have other 
alternatives to traditional dividends, such as special dividends, that 
may not raise the same concerns with respect to the commitment of 
future resources.
---------------------------------------------------------------------------

    \222\ See id.
---------------------------------------------------------------------------

    In addition, our adoption of quarterly disclosures mitigates some 
of the concerns of commenters seeking an exemption for various issuer 
categories,\223\ which discussed the

[[Page 36019]]

burden of the proposed requirement to provide daily repurchase data one 
business day after execution of the issuer's share repurchase order. 
The final amendments do not require issuers to provide daily repurchase 
data the day after execution. As a result, we expect the change from 
the proposal to require quarterly reporting (or semi-annual reporting 
for Listed Closed-End Funds) to substantially alleviate commenters' 
cost concerns for all issuer categories.\224\
---------------------------------------------------------------------------

    \223\ See letters from ABA Committee, ACCO, ADISA, Better 
Markets I, BPI & Amer. Bankers Assoc., BrilLiquid, CBA, CFA 
Institute, CII, Cravath, Hecht, IBC, ICGN, ICI I, Nareit, NYC Bar, 
NYSE, Profs. Lewis and White, Roosevelt, SIFMA II, Sullivan, TIAA, 
TotalEnergies, and VEUO.
    \224\ See, e.g., letters from ICI I (stating that, in the event 
the Commission determines to apply the proposal to Listed Closed-End 
Funds, it should ``exclude them from the Form SR reporting 
requirements and, instead, require funds to provide the daily 
information less frequently in their Form N-CSR'' because of ``the 
unique characteristics of funds, including their status as pass-
through investment vehicles with disclosed NAVs that promptly 
reflect the effects of share repurchases, and the diminished 
concerns that fund insiders will misuse share repurchases for their 
own self-interest'') and Roosevelt (stating generally that ``it is 
likely that these foreign issuers are already disclosing this 
information in other jurisdictions, so would not incur compliance 
costs'').
---------------------------------------------------------------------------

    Additionally, we note that some commenters asked the Commission 
specifically to exempt FPIs that are required to provide share 
repurchase information in their home country disclosures and furnish 
that information on Form 6-K.\225\ Consistent with our requirements 
generally,\226\ if an FPI's home country disclosures furnished on a 
Form 6-K satisfy the Form F-SR requirements, it can incorporate by 
reference its Form 6-K disclosures into its Form F-SR. Therefore, we do 
not believe such an exemption is necessary. FPIs that already disclose 
daily data in another jurisdiction will experience only incremental 
burdens in reporting those transactions. While these data may already 
be available to some investors, making them accessible to all 
investors, at the same frequency as for corporate issuers that file on 
domestic forms, will allow investors to receive the same information 
for FPIs as they receive for corporate issuers that file on domestic 
forms, regardless of the form FPIs choose to use.\227\ To the extent 
that these disclosures may benefit an issuer's competitors, placing FPI 
filing obligations on the same tempo as corporate issuers that file on 
domestic forms will also help to level competition between FPIs and 
those issuers.
---------------------------------------------------------------------------

    \225\ See, e.g., letters from SIFMA II, Sullivan, and VEUO.
    \226\ See 17 CFR 240.12b-23.
    \227\ One commenter asserted that EU regulations with respect to 
insider trading and market manipulation reduce the need for 
additional disclosure with respect to repurchases. See letter from 
VEUO. We disagree with this suggestion for essentially the same 
reasons we disagree with commenters who made similar arguments 
regarding Rules 10b5-1 and 10b-18.
---------------------------------------------------------------------------

    Other commenters requested that FPIs 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).\228\ We believe, 
however, that these disclosures help investors to understand the 
purposes for a repurchase. The final amendments, therefore, include 
those disclosure requirements. To the extent that issuers do not rely 
on the safe harbor or affirmative defense for trades conducted outside 
the United States, any disclosure obligation on FPIs will be minimal. 
If such issuers are concerned about any negative inferences, they may 
include additional disclosure explaining why they chose not to rely on 
such safe harbor or affirmative defense.
---------------------------------------------------------------------------

    \228\ See, e.g., letters from SIFMA II and VEUO.
---------------------------------------------------------------------------

    We are revising the proposed requirement to disclose whether 
purchases were ``made in reliance on'' the Rule 10b-18 non-exclusive 
safe in response to commenters' concerns that issuers are only able to 
indicate their intent to comply with the safe harbor. The final rule 
will therefore require disclosure of purchases that were ``intended to 
qualify for'' the safe harbor.\229\
---------------------------------------------------------------------------

    \229\ See, e.g., letters from SIFMA II and Sullivan. We note the 
commenters suggested that we adopt the phrase ``intended to comply 
with'' the safe harbor, but we believe it is more clear to require 
that issuers disclose whether trades were ``intended to qualify 
for'' the safe harbor.
---------------------------------------------------------------------------

    We have also modified the manner in which issuers will report 
certain information relating to Rules 10b-18 and 10b5-1. Proposed Form 
SR would have required issuers to disclose, in a table, the total 
number of shares purchased daily in reliance on Rule 10b-18 or intended 
to qualify for the affirmative defense provisions of Rule 10b5-1(c). 
The proposed amendments to Item 703, Form 20-F, and Form N-CSR would 
have similarly required issuers to disclose, by footnote to their 
monthly repurchase table or the narrative accompanying the table, the 
number of shares purchased in reliance on Rule 10b-18 and the number 
intended to qualify for the affirmative defense provisions of Rule 
10b5-1(c) (and if so, the date(s) the plan was adopted or terminated).
    The final amendments require issuers to disclose, in tabular form, 
the number of shares purchased daily in reliance on Rule 10b-18 or 
intended to qualify for the affirmative defense provisions of Rule 
10b5-1(c), as proposed. In a change from the proposal, the final 
amendments also require issuers to disclose, by footnote to the daily 
repurchase table, the date any plan that is intended to satisfy the 
affirmative defense conditions of Rule 10b5-1(c) for the shares was 
adopted or terminated. The proposed amendments would have required this 
information in the narrative disclosures accompanying the monthly 
repurchase table required by Item 703, Form 20-F, and Form N-CSR. After 
changing the frequency that issuers must provide their daily 
quantitative share repurchase disclosure from one business day after 
execution, as proposed, to quarterly or semi-annually in the final 
amendments, and deleting the monthly repurchase table from Item 703, 
Form 20-F, and Form N-CSR, we believe that requiring this Rule 10b-18 
and Rule 10b5-1(c) information in both the table and the narrative 
discussion would be duplicative. Requiring this information with the 
table would be more efficient for issuers and easier to understand for 
investors.
    Contrary to some commenters, we believe that whether an issuer 
intended to make use of Rule 10b-18 or Rule 10b5-1 in conducting its 
repurchases provides useful information to investors. The disclosure as 
to whether purchases were intended to qualify for the Rule 10b-18 non-
exclusive safe harbor or the affirmative defense under Rule 10b5-1 
provides investors with deeper insight into how an issuer has 
structured and designed its repurchase program. The disclosure with 
respect to Rule 10b-18 allows investors to gauge whether the given 
repurchase program is designed to ``minimize the market impact of the 
issuer's repurchases, thereby allowing the market to establish a 
security's price based on independent forces.'' \230\ Further, this 
disclosure could provide a more informed understanding of how many 
shares may yet be purchased under the timing and volume parameters of 
Rule 10b-18, reducing information asymmetries for current and 
prospective shareholders. In these ways, the disclosure will allow 
investors to better evaluate the efficiency and impacts of a 
repurchase. While some commenters indicated that as a matter of 
practice repurchase programs are designed to meet both the Rule 10b-18 
and Rule 10b5-1 safe harbors,\231\ issuers are not required to do so. 
Additionally, with disclosure of whether an issuer intended to satisfy 
the affirmative defense under Rule 10b5-1,

[[Page 36020]]

investors can more readily determine whether the issuer's managers took 
steps to mitigate the possibility of conducting a repurchase while in 
possession of material nonpublic information.
---------------------------------------------------------------------------

    \230\ 2003 Adopting Release, supra note 5, at 64953.
    \231\ See, e.g., letters from HP and Simpson Thacher.
---------------------------------------------------------------------------

    Moreover, we are cognizant of the concern shared by some commenters 
that the required Rule 10b5-1(c) and Rule 10b-18 disclosures could lead 
to unfounded speculation or cause negative inferences.\232\ Rule 10b-18 
specifically disclaims any negative inference from an issuer's choice 
not to make use of the safe harbor, and Rule 10b5-1 is similarly 
described as an ``affirmative defense.'' Therefore, we believe that any 
unwarranted inferences from disclosure that an issuer did or did not 
use such safe harbor or defense would be limited. We believe the 
required disclosures achieve a proper balance between that concern and 
the need of investors for additional information concerning an issuer's 
share repurchases.
---------------------------------------------------------------------------

    \232\ See, e.g., letters from Maryland Bar and Sullivan.
---------------------------------------------------------------------------

    We note that one commenter suggested that the final amendments 
should include additional disclosures regarding an issuer's Rule 10b5-
1(c) plan, such as 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.\233\ We have not included these 
additional required disclosures relating to Rule 10b5-1(c) because we 
believe the required information, together with existing obligations of 
issuers to disclose material changes to their share repurchase plans 
whether under Rule 10b5-1 or otherwise, is sufficient to inform 
investors about an issuer's repurchases. The required disclosures 
achieve an appropriate balance between the concerns expressed by 
commenters and the need of investors for additional information 
concerning an issuer's share repurchases. As discussed above in this 
section, if any of the additional disclosures suggested by the 
commenter or other additional disclosures are material and necessary to 
make other repurchase disclosures not misleading under the 
circumstances, the issuer must provide those disclosures.\234\
---------------------------------------------------------------------------

    \233\ See letter from CFA Institute.
    \234\ See 17 CFR 240.12b-20 (``Rule 12b-20'').
---------------------------------------------------------------------------

    Further, we note that some commenters recommended that we repeal 
Rule 10b-18 and replace it with bright-line limits,\235\ and that we 
not apply the proposed Rule 10b5-1(c) and Rule 10b-18 disclosures to 
FPIs.\236\ Repealing and replacing Rule 10b-18 is beyond the scope of 
this rulemaking. Consistent with our reasoning for not allowing an 
exemption for certain issuers relating to the daily quantitative 
repurchase disclosures, we do not believe the final amendments should 
exempt FPIs from the Rule 10b5-1(c) and Rule 10b-18 disclosures. These 
disclosures benefit all investors in issuers that conduct repurchases.
---------------------------------------------------------------------------

    \235\ See, e.g., letters from AFREF et al., CFA Institute, CII, 
Lazonick & Jacobson, Oxfam, and Prof. Palladino.
    \236\ See letter from SIFMA II.
---------------------------------------------------------------------------

    One commenter expressed the view that the proposed amendments would 
interfere with state law.\237\ The commenter asserted that the 
Commission's purpose in proposing the amendments was to deter share 
repurchases generally, which would ``regulate boardroom decisions over 
which the Commission has no authority.'' The final amendments do not 
regulate repurchases or board consideration of them, nor are they 
intended to deter share repurchases. While it is possible that the 
amendments could result in some reduction in issuer repurchases,\238\ 
we do not expect these additional disclosure requirements to have a 
significant deterrent effect on these transactions overall. In any 
case, the purpose of the final amendments is to provide shareholders 
with additional data about the timing and other details of the issuer's 
repurchases to allow them to make more informed investment and voting 
decisions, consistent with our authority under the Exchange Act.
---------------------------------------------------------------------------

    \237\ See letter from Cato.
    \238\ See infra Section V.A.2.
---------------------------------------------------------------------------

    Another commenter asserted that the proposed amendments' daily 
disclosure requirements would violate the First Amendment.\239\ The 
commenter claimed that the Commission failed to explain why monthly 
disclosures would not be adequate and did not acknowledge the 
compelled-speech burdens that come with a next-day reporting regime. 
The commenter also noted that the proposed amendments' ``unjustified 
insistence on next-day reporting'' were not ``adequately tailored'' to 
the governmental interests at stake and to reduce instances of 
compelled speech.
---------------------------------------------------------------------------

    \239\ See letter from Chamber III.
---------------------------------------------------------------------------

    We disagree with the commenter's assertion that the proposed 
amendments would violate the First Amendment. As we have explained 
earlier in this section, periodic disclosure of daily repurchases 
provide a level of detail that will allow investors to assess the 
efficiency of, and motives for, those transactions. Additionally, daily 
repurchase disclosure allows investors to monitor and evaluate the 
issuer's share repurchases and their effects on the market for the 
issuer's securities. This disclosure is thus factual in nature and 
advances important interests as discussed throughout this release. 
Further, after considering comments, the final amendments require 
periodic reporting of an issuer's daily repurchases, as opposed to 
daily reporting of an issuer's daily repurchases, which greatly 
mitigates the associated burdens.
    Finally, we note that a number of commenters asked the Commission 
to clarify certain terms, times, and transactions, including more 
precisely defining ``share repurchase program,'' \240\ ``executed,'' 
\241\ ``business day,'' \242\ ``before the end;'' \243\ addressing 
whether issuers operating in time zones other than Eastern Time would 
be given additional time to file their Form SR; \244\ and clarifying 
whether the proposal would encompass withhold-to-cover shares.\245\ 
Because the final amendments do not require issuers to provide their 
daily quantitative repurchase disclosures one business day after 
execution of their share repurchase order, there is no longer a need 
for many of these requested clarifications.
---------------------------------------------------------------------------

    \240\ See letter from Cravath.
    \241\ See letters from Chamber II, Cravath, DLA Piper, FedEx, 
HudsonWest, Simpson Thacher, and Wilson Sonsini.
    \242\ See letter from Bishop.
    \243\ See id.
    \244\ See letters from Chevron and HP.
    \245\ See letter from Nash.
---------------------------------------------------------------------------

    We do not believe it is necessary to make any further 
clarifications based on the other comments received. The main 
difference between the current Item 703 quantitative repurchase 
disclosures and the quantitative repurchase disclosures in the final 
amendments is that issuers are required to aggregate their share 
repurchases on a daily basis instead of on a monthly basis. Therefore, 
the terms, times, and transactions used for, and applicable to, the 
current Item 703 disclosure requirements should be applied to the final 
amendments.\246\
---------------------------------------------------------------------------

    \246\ For example, as we discussed in the Proposing Release, the 
Commission uses a commonly understood meaning of the term 
``execution,'' which will not change based on the final amendments. 
See Proposing Release, supra note 2, at n. 23. We are not adopting 
the suggestion of one commenter to instead require reporting based 
on the settlement date rather than the execution date, see letter 
from NASAA, because the commenter's concerns about the execution 
date were tied closely to potential errors that might arise under an 
execution-date regime with daily filing. Because we are adopting 
quarterly reporting, we think the commenter's concerns about the 
execution date will be greatly lessened, consistent with our 
experience with Item 703.

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[[Page 36021]]

B. Narrative Revisions to Item 703 of Regulation S-K, Form 20-F, and 
Form N-CSR Additional Disclosure

1. Proposed Amendments
    The Commission proposed to revise and expand the disclosure 
requirements in Item 703 of Regulation S-K, Form 20-F, and Form N-CSR 
to work in conjunction with proposed Form SR to provide investors with 
more detailed and qualitative information that they could use to 
evaluate issuer share repurchases. Specifically, the proposal would 
require an issuer to disclose:
     The objective or rationale for its share repurchases and 
process or criteria used to determine the amount of repurchases;
     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;
     Whether it made its repurchases 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 purchases were made in reliance on the Rule 10b-18 
non-exclusive safe harbor.
    Additionally, the Commission proposed to require that issuers 
disclose if any of their officers or directors subject to the reporting 
requirements under Exchange Act section 16(a) purchased or sold shares 
or other units of the class of the issuer's equity securities that is 
the subject of an issuer share repurchase plan or program within ten 
business days before or after the announcement of an issuer purchase 
plan or program by checking a box before the tabular disclosure of 
issuer purchases of equity securities.
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
    A number of commenters supported the proposal to require an issuer 
to disclose its objective or rationale for its share repurchases, and 
the process or criteria used to determine the amount of 
repurchases.\247\ However, most commenters who discussed this proposal 
opposed it.\248\ These commenters expressed concern that the required 
disclosure could divulge competitive or sensitive information that 
would be harmful to the issuer,\249\ or result in boilerplate 
disclosure that would not prove meaningful to investors.\250\
---------------------------------------------------------------------------

    \247\ See, e.g., letters from CalPERS, CFA Institute, CII, ICGN, 
Prof. Palladino, NASAA, Public Citizen, Roosevelt, and Senators 
Rubio & Baldwin.
    \248\ See, e.g., letters from BPI & Amer. Bankers Assoc., 
Chamber II, Coalition, Cravath, Dow, Jones Day, Kirkland Ellis, 
Morris, NAM, PNC, Profs. Lewis and White, SCG, Shearman, SIFMA II, 
Sullivan, and Vistra.
    \249\ See, e.g., letters from BPI & Amer. Bankers Assoc., PNC, 
Profs. Lewis and White, Shearman, SIFMA II, and SCG.
    \250\ See, e.g., letters from Chamber II, Coalition, Cravath, 
Jones Day, Morris, NAM, and Sullivan.
---------------------------------------------------------------------------

    Other commenters objected to the proposal on the basis that the 
disclosures could be misleading because they would show only a small 
part of a company's overall liquidity and capital allocation 
policies.\251\ These commenters suggested that any required objective 
or rationale disclosures concerning an issuer's share repurchase plans 
should be included within a filing's Management's Discussion and 
Analysis of Financial Condition and Results of Operations (``MD&A'') 
section, so that the disclosures can be evaluated within the larger 
context of liquidity and capital allocation. Other commenters suggested 
that the final amendments should not require the disclosure of all 
share repurchase plans, but only those that are material to the 
issuer.\252\ Another commenter asserted that the disclosures would 
violate the First Amendment because they would require issuers to 
provide disclosure other than ``purely factual, uncontroversial 
information'' \253\ and would force the issuer to speak when doing so 
would be unduly burdensome.\254\
---------------------------------------------------------------------------

    \251\ See, e.g., letters from ABA Committee, Dow, Profs. Lewis 
and White, Quest, and Shearman. One of these commenters noted that 
issuers often include a discussion of repurchase activity in their 
MD&A section. See letter from Quest.
    \252\ See, e.g., letters from Cravath and Profs. Lewis and 
White.
    \253\ See letter from Chamber III (citing NIFLA v. Becerra, 138 
S. Ct. 2361, 2372 (2018)).
    \254\ See letter from Chamber III (citing Am. Meat Inst. v. 
USDA, 760 F.3d 18, 34 (D.C. Cir. 2014)).
---------------------------------------------------------------------------

    In contrast, other commenters suggested that the Commission require 
more disclosure than was proposed.\255\ A few of these commenters 
recommended that issuers be required to announce all of their share 
repurchase plans \256\ in a standardized format \257\ or on Form 8-
K.\258\ A number of commenters stated that the final amendments should 
require issuers to disclose the manner in which they are funding their 
share repurchases \259\ out of the concern that some issuers may borrow 
funds to finance those transactions.\260\ One commenter asserted that 
the final amendments should require a five-year lookback to compare the 
average price per repurchased share against the price per share 
received pursuant to new issuances and stock compensation plans.\261\ 
Some commenters recommended disclosure about the impact of share 
repurchases on performance targets,\262\ and other commenters suggested 
that we adopt amendments requiring issuers to disclose whether they 
considered other uses for the funds being used for the share 
repurchases.\263\
---------------------------------------------------------------------------

    \255\ See, e.g., letters from AFREF et al., Better Markets I, 
BrilLiquid, CalPERS, CFA Institute, Form Letter A, ICGN, Prof. 
Palladino, Roosevelt, and Senators Rubio & Baldwin.
    \256\ See, e.g., letters from BrilLiquid, CalPERS, CFA 
Institute, ICGN, and Prof. Palladino.
    \257\ See letter from CalPERS.
    \258\ See, e.g., letters from BrilLiquid and ICGN.
    \259\ See, e.g., letters from AFREF et al., Better Markets I, 
CalPERS, CFA Institute, Form Letter A, Prof. Palladino, Roosevelt, 
and Senators Rubio & Baldwin.
    \260\ See, e.g., letters from AFREF et al., CalPERS, CFA 
Institute, Form Letter A, Prof. Palladino, and Senators Rubio & 
Baldwin.
    \261\ See letter from CFA Institute.
    \262\ See, e.g., letters from CFA Institute and CII.
    \263\ See, e.g., letters from CFA Institute and Form Letter A.
---------------------------------------------------------------------------

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
    A number of commenters supported the proposal to require issuers to 
disclose 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.\264\ Some commenters recommended that the Commission 
adopt a more comprehensive requirement than was proposed.\265\ A few of 
these commenters asked the Commission to prohibit corporate insider 
trading before, during, and after buyback announcements and 
execution.\266\ One commenter recommended requiring disclosure of any 
directors, officers, and ten percent

[[Page 36022]]

shareholders who purchased or sold shares within ten days of an 
issuer's buyback program announcement.\267\
---------------------------------------------------------------------------

    \264\ See, e.g., letters from CII and CFA Institute.
    \265\ See, e.g., letters from AFREF et al., Better Markets I, 
CII, Oxfam, Prof. Palladino, and Public Citizen.
    \266\ See, e.g., letters from AFREF et al., Better Markets I, 
Oxfam, Prof. Palladino, and Public Citizen.
    \267\ See letter from CII.
---------------------------------------------------------------------------

    A few commenters, however, opposed this proposal.\268\ One of these 
commenters \269\ suggested that this information would be more 
appropriate in 17 CFR 229.407 (``Item 407 of Regulation S-K''), which 
contains disclosure requirements regarding corporate governance. 
Another commenter asserted that the proposed disclosure could create 
the erroneous expectation that an issuer must have such policies and 
procedures when it may not have them.\270\ One commenter suggested that 
this requirement would effectively ban such insider sales.\271\
---------------------------------------------------------------------------

    \268\ See, e.g., letters from ABA Committee and PNC.
    \269\ See letter from ABA Committee.
    \270\ See letter from PNC.
    \271\ See letter from Maryland Bar.
---------------------------------------------------------------------------

c. Comments on Checkbox Requirement
    Several commenters supported the proposed requirement for issuers 
to disclose if any of their officers or directors subject to the 
reporting requirements under section 16(a) of the Exchange Act 
purchased or sold shares or other units of the class of the issuer's 
equity securities that is the subject of an issuer share repurchase 
plan or program within ten business days before or after the 
announcement of an issuer purchase plan or program by checking a box 
before the tabular disclosure of issuer purchases of equity 
securities.\272\ Several of these commenters specifically supported 
including the ten business-day period.\273\ One commenter noted that 
the proposal ``would allow investors to more fully understand how 
officer and director stock purchase and sale activities interrelate 
with an issuer's share repurchase program.'' \274\ Another commenter 
stated that the checkbox ``would allow investors to determine whether 
corporate insiders are potentially benefiting unfairly from knowledge 
asymmetry by, for example, purchasing shares ahead of an issuer's 
repurchase plan announcement, knowing that share prices usually rise 
with such an announcement.'' \275\
---------------------------------------------------------------------------

    \272\ See, e.g., letters from Better Markets I, CFA Institute, 
Hecht, and ICGN. One of these commenters suggested expanding the 
checkbox period to 30 days before and after adoption of a repurchase 
plan because ``[i]nsiders will know well before the announcement 
that the company is considering a stock repurchase program.'' See 
letter from Hecht.
    \273\ See, e.g., letters from Better Markets I, CFA Institute, 
and ICGN. See also letter from Hecht (supporting a 30-day period).
    \274\ See letter from CFA Institute.
    \275\ See letter from Better Markets I.
---------------------------------------------------------------------------

    Other commenters, however, opposed the proposal.\276\ Most of the 
commenters opposed to the proposal indicated that the proposed checkbox 
requirement would be unnecessary \277\ because it would be duplicative 
of the required disclosures in Exchange Act section 16,\278\ and 
because trading on material nonpublic information is already 
prohibited.\279\ Similarly, one commenter stated that insider 
transactions occurring after a repurchase plan announcement should be 
excluded from the checkbox requirement because the information is 
already public.\280\ Another commenter stated that, if Form SR is 
adopted, the data from that form should suffice.\281\ One commenter 
asserted it opposed the proposal because insiders do not have access to 
any particular repurchase information that would give them a trading 
advantage.\282\ Some commenters noted that FPIs would be effectively 
excluded from the checkbox requirement because they are exempt from 
Exchange Act section 16 reporting.\283\
---------------------------------------------------------------------------

    \276\ See, e.g., letters from ABA Committee, BrilLiquid, Chamber 
II, Cravath, DLA Piper, HP, Quest, and Simpson Thacher.
    \277\ See, e.g., letters from ABA Committee, BrilLiquid, Chamber 
II, Cravath, DLA Piper, Quest, and Simpson Thacher.
    \278\ See, e.g., letters from ABA Committee, DLA Piper, and 
Simpson Thacher.
    \279\ See letter from Quest.
    \280\ See letter from DLA Piper.
    \281\ See letter from Cravath.
    \282\ See letter from HP.
    \283\ See, e.g., letters from CBA and Cravath.
---------------------------------------------------------------------------

    Several commenters expressed concern about the potential for 
misinterpretations as a result of the checkbox.\284\ One commenter 
claimed that the checkbox requirement could incorrectly imply that 
trading outside the checkbox window is always permissible.\285\ Another 
commenter stated that the checkbox could cause investors to assume 
incorrectly that the issuer engaged in inappropriate behavior.\286\ 
Some commenters indicated that the checkbox requirement could give the 
incorrect impression that insiders were trading securities as a result 
of the issuer's repurchase announcement instead of for other reasons, 
such as long-established Rule 10b5-1(c) plans \287\ or automatic sales 
to fund tax withholding on share vesting.\288\
---------------------------------------------------------------------------

    \284\ See, e.g., letters from ABA Committee, Chamber II, 
Cravath, Quest, and Vistra.
    \285\ See letter from Cravath.
    \286\ See letter from Chamber II (stating that ``any positive 
correlation between share repurchases and insider selling is likely 
driven by blackout periods and not opportunistic insider trading 
around repurchases.'' But see letter from Prof. Jackson, Dr. Hu, and 
Dr. Zytnick (refuting that commenter's analysis by providing their 
own analysis showing that, even after controlling for blackout 
periods, insider sales are significantly higher during 
repurchases.).
    \287\ See, e.g., letters from Cravath, DLA Piper, and PNC.
    \288\ See letter from PNC.
---------------------------------------------------------------------------

    Some commenters asserted that Rule 10b5-1(c) plan transactions or 
automatic sales to fund tax withholding on share vesting should be 
excluded from the checkbox requirement.\289\ One commenter asked that 
the Commission state that ``officers and directors trading in a 
company's securities at the same time that the company is buying back 
its own securities is not in violation [of] any rule or otherwise 
harmful.'' \290\ Another commenter stated that insider purchases or 
sales should be included in the checkbox requirement only if an 
issuer's repurchase plan is publicly announced and implemented.\291\ A 
different commenter recommended that the Commission permit issuers to 
include context for the checkbox so that trading activities are not 
misconstrued.\292\
---------------------------------------------------------------------------

    \289\ See, e.g., letters from Cravath, DLA Piper, and PNC.
    \290\ See letter from Quest.
    \291\ See letter from Cravath (``We also do not believe that a 
checkbox requirement is appropriate in the context of repurchase 
plans that are not publicly announced.'').
    \292\ See letter from ABA Committee.
---------------------------------------------------------------------------

    Finally, one commenter asked the Commission to clarify how the 
checkbox would apply to issuers with multiple classes of stock, each 
with its own repurchase plan; whether announcing the increase of an 
existing share repurchase plan would constitute the announcement of a 
new repurchase plan for purposes of the requirement; and whether an 
issuer may rely on Forms 3,\293\ 4,\294\ and 5 \295\ filed with the 
Commission to determine whether it should check the box.\296\
---------------------------------------------------------------------------

    \293\ 17 CFR 249.103.
    \294\ 17 CFR 249.104.
    \295\ 17 CFR 249.105.
    \296\ See letter from ABA Committee.
---------------------------------------------------------------------------

3. Final Amendments
    We are adopting final amendments relating to the revision and 
expansion of the disclosure requirements in Item 703 of Regulation S-K, 
Form 20-F, and Form N-CSR, with some modifications from the proposal in 
response to comments received. Consistent with the proposed amendments, 
these final amendments work in conjunction with the new periodic 
quantitative repurchase disclosures to provide investors with more 
detailed information to evaluate an issuer's share repurchases. We 
continue to believe that these disclosures will help investors evaluate 
whether the issuer is engaged

[[Page 36023]]

in efficient repurchases. Specifically, the final amendments require an 
issuer to disclose:
     The objectives or rationales for each repurchase plan or 
program and process or criteria used to determine the amount of 
repurchases; \297\
---------------------------------------------------------------------------

    \297\ In a clarifying change from the proposal, the final 
amendments will require disclosure of the ``objectives or 
rationales'' rather than the ``objective or rationale'' for each 
repurchase plan or program to make clear that the disclosure is not 
limited to one objective or rationale if an issuer has more than 
one.
---------------------------------------------------------------------------

     Any policies and procedures relating to purchases and 
sales of its securities by its officers and directors during a 
repurchase program, including any restriction on such transactions; and
     Whether any of its directors and officers subject to the 
reporting requirements under Exchange Act section 16(a) (for domestic 
corporate issuers and Listed Closed-End Funds), or directors or senior 
management that would be identified pursuant to Item 1 of Form 20-F 
(for FPIs, whether filing on the forms exclusively available to FPIs or 
on the domestic forms) purchased or sold shares or other units of the 
class of the issuer's equity securities that are registered pursuant to 
section 12 of the Exchange Act and subject of a publicly announced 
repurchase plan or program within four business days before or after 
the issuer's announcement of such repurchase plan or program or the 
announcement of an increase of an existing share repurchase plan or 
program by checking a box before the tabular disclosure of issuer 
purchases of equity securities.\298\
---------------------------------------------------------------------------

    \298\ As noted above, while we are not adopting the proposed 
requirement to provide narrative disclosure under Item 703 regarding 
trades intended to qualify for the non-exclusive safe harbor of 
Rules 10b-18 or the affirmative defense under Rule 10b5-1(c), we are 
requiring substantially the same information be disclosed in tabular 
fashion in other registrant filings. See supra notes 229-230 and 
accompanying text.
---------------------------------------------------------------------------

    Additionally, the final amendments require disclosure of the number 
of shares (or units) purchased other than through a publicly announced 
plan or program, and the nature of the transaction (e.g., whether the 
purchases were made in open-market transactions, tender offers, in 
satisfaction of the issuer's obligations upon exercise of outstanding 
put options issued by the issuer, or other transactions), and certain 
disclosures for publicly announced repurchase plans or programs, 
including:
     The date each plan or program was announced;
     The dollar amount (or share or unit amount) approved;
     The expiration date (if any) of each plan or program;
     Each plan or program that has expired during the period 
covered by the table; and
     Each plan or program the issuer has determined to 
terminate prior to expiration, or under which the issuer does not 
intend to make further purchases.
    This same information is already required to be disclosed in our 
current rules. In current Item 703, this information is required in a 
footnote to the monthly quantitative share repurchase disclosure table. 
The final amendments do not change the substance of these requirements. 
The only change is that the final amendments change the form of the 
requirements from an instruction to the main text of Item 703 and no 
longer require the disclosure to be part of a footnote to the monthly 
table, as the monthly table will no longer exist. Instead this 
disclosure will be required in the main text of the narrative 
discussion. We note that some commenters suggested that the final 
amendments should include a number of additional, more prescriptive 
disclosure requirements relating to the new narrative requirements that 
are being added to Item 703, Form 20-F, and Form N-CSR.\299\ The 
disclosure we are adopting will provide the information necessary for 
investors to evaluate the efficiency of issuer repurchases and their 
impact on the market, and we do not believe that the particular 
individual disclosures suggested by commenters are needed. To the 
extent further material information is necessary to make such 
disclosures not misleading, the issuer will be required to provide that 
information under existing Rule 12b-20.\300\
---------------------------------------------------------------------------

    \299\ Some commenters suggested particular additional 
disclosures such as a five-year lookback, see letter from CFA 
Institute, the impact of share repurchases on performance targets, 
see letters from CFA Institute and CII, or alternative uses for the 
share repurchase funds, see letter from CFA Institute and Form 
Letter A.
    \300\ See Rule 12b-20 (``In addition to the information 
expressly required to be included in a statement or report, there 
shall be added such further material information, if any, as may be 
necessary to make the required statements, in the light of the 
circumstances under which they are made not misleading.'').
---------------------------------------------------------------------------

    Other commenters suggested that certain aspects of the disclosure 
requirements in new Item 703(a) \301\ should not be adopted because 
they could result in misleading information. We disagree. We believe 
that the required narrative disclosures in the final amendments provide 
the information necessary for investors to understand and evaluate an 
issuer's share repurchases in a clear and concise manner. For example, 
the checkbox requirement will assist investors in identifying issuers 
where there is a possibility that repurchases affected the value of 
executive compensation, permitting investors to further investigate 
whether this possibility should affect their assessment of the 
repurchase.\302\ If an issuer believes any of the required disclosures 
would result in misleading or confusing information, the issuer may 
provide additional disclosure to put the required information in 
context. Additionally, as with all of our required disclosures, under 
our rules issuers are required to provide any additional information 
necessary to make the required disclosure not misleading.\303\ 
Moreover, issuers are not foreclosed from discussing their repurchases 
in other sections of the document, such as in the MD&A section or in 
the corporate governance section required by Item 407 of Regulation S-
K.
---------------------------------------------------------------------------

    \301\ The information required in new Item 703(a) would have 
been required in proposed Item 703(c). We made this change in the 
final amendments because we are requiring the tabular disclosure of 
the daily quantitative repurchase data in new Item 601(b)(26) 
instead of proposed Item 703(a) and (b). See infra Section III.A.3.
    \302\ In response to the commenter who suggested we should 
exclude from this disclosure automatic sales to fund certain tax 
withholding ``to avoid the risk that the checked box would be 
provocative despite the fact that the underlying transaction would 
only reflect a decision made, in most cases, a year or more prior to 
the sale and a decision not typically made by the officer or 
director personally,'' we note that in such a circumstance, the 
issuer could provide additional disclosure as context for the 
required disclosure, which may avoid the concern raised by the 
commenter. See letter from PNC.
    \303\ See Rule 12b-20.
---------------------------------------------------------------------------

    Some commenters stated that they opposed the requirement in 
proposed Item 703(a)(1) to disclose the objective or rationale for an 
issuer's share repurchases and process or criteria used to determine 
the amount of repurchases because this requirement would result in the 
exposure of competitive or sensitive information.\304\ One commenter 
asked the Commission to clarify that the final amendments are not 
intended to require an issuer to disclose such information.\305\ 
Although the disclosures required by the final amendments should convey 
a thorough understanding of the issuer's objectives or rationales for 
the repurchases, and the process or criteria it used in determining the 
amount of the repurchase, the final amendments do not require issuers 
to provide disclosure at a level of granularity that would

[[Page 36024]]

reveal any competitive or sensitive information beyond what may already 
be gleaned from other disclosures regarding the business and financial 
condition of the issuer.
---------------------------------------------------------------------------

    \304\ See, e.g., letters from BPI & Amer. Bankers Assoc., PNC, 
Profs. Lewis and White, Shearman, SIFMA II, and SCG.
    \305\ See letter from PNC.
---------------------------------------------------------------------------

    Other commenters opposed this requirement because, they asserted, 
it would result in boilerplate disclosure.\306\ We disagree and note 
that the narrative disclosure, in conjunction with the new periodic 
quantitative repurchase disclosures, must provide investors with 
sufficiently detailed information to evaluate an issuer's share 
repurchases. The narrative disclosure also should be appropriately 
tailored to an issuer's particular facts and circumstances.
---------------------------------------------------------------------------

    \306\ See, e.g., letters from Chamber II, Coalition, Cravath, 
Jones Day, Morris, NAM, and Sullivan. We note, however, that one 
commenter asserted that, even if the final amendments lead to 
boilerplate disclosures, the disclosure would still benefit 
investors because it would provide investors with more information 
than they have currently, it could become a point of engagement, and 
shareholders would be able to inquire about allocation decisions or 
provide support for the repurchase. See letter from ICGN.
---------------------------------------------------------------------------

    We expect issuers to provide the required disclosure without 
relying on boilerplate language, and we received several helpful 
suggestions from commenters in that regard.\307\ Although not an 
exclusive or exhaustive list, commenters suggested that issuers could 
avoid boilerplate language by discussing other possible ways to use the 
funds allocated for the repurchase \308\ and comparing the repurchase 
with other investment opportunities that would ordinarily be considered 
by the issuer, such as capital expenditures and other uses of 
capital.\309\ Issuers could also discuss the expected impact of the 
repurchases on the value of remaining shares.\310\ Moreover, in 
connection with their disclosure of the objectives or rationales for a 
repurchase, issuers could discuss the factors driving the repurchase, 
including whether their stock is undervalued, prospective internal 
growth opportunities are economically viable, or the valuation for 
potential targets is attractive.\311\ Issuers might additionally 
discuss the sources of funding for the repurchase, where material, such 
as, for example, in the case where the source of funding results in tax 
advantages that would not otherwise be available for a repurchase.
---------------------------------------------------------------------------

    \307\ See, e.g., letters from AFREF et al., CFA Institute, CII, 
Hecht, Prof. Palladino, Roosevelt, and Senators Rubio & Baldwin.
    \308\ See, e.g., letters from AFREF et al. and Senators Rubio & 
Baldwin.
    \309\ See letter from Senators Rubio & Baldwin.
    \310\ See, e.g., letters from Prof. Palladino and Roosevelt.
    \311\ See letter from CII.
---------------------------------------------------------------------------

    We disagree with the commenter who asserted that the amendments 
would violate the First Amendment on the grounds that the required 
disclosures call for controversial opinions, not ``purely factual'' 
information.\312\ As we have explained, there are a number of reasons 
why issuers undertake share repurchases, and an issuer's purpose in 
undertaking a particular repurchase is significant information that can 
aid investors in assessing the repurchase, including its purposes and 
impacts on the firm and the issuer's value. The requirement that an 
issuer disclose the objectives or rationales behind a repurchase can be 
directly informative for investors and provide investors with the 
proper context to understand the daily quantitative repurchase 
disclosures (such as by allowing investors to confirm that the daily 
pattern of trades is consistent with the issuer's stated purpose for 
those repurchases) and to monitor and evaluate the issuer's share 
repurchase and its effects on the issuer's securities. This requirement 
thus involves disclosure that is factual in nature, advances important 
interests as discussed throughout this release, and complies with the 
First Amendment.
---------------------------------------------------------------------------

    \312\ See letter from Chamber III.
---------------------------------------------------------------------------

    We also disagree with the commenter who suggested that the 
requirement to disclose the issuer's policies and procedures relating 
to purchases and sales of its securities by its officers and directors 
during a repurchase program would effectively ban such insider 
sales.\313\ Disclosure of any such policies may aid investors in 
determining the extent to which executive's interests may have, at 
least in part, helped motivate repurchases. This is a disclosure 
obligation that will provide investors with additional relevant 
disclosures about issuer repurchases and not a requirement for an 
issuer to have, adopt, or change any such policies and procedures.
---------------------------------------------------------------------------

    \313\ See letter from Maryland Bar.
---------------------------------------------------------------------------

    In a modification from the Proposed Rule, we are requiring that 
issuers indicate by checkbox that covered executives have engaged in 
equity transactions within four business days of a repurchase 
announcement, rather than the ten business days proposed. While the 
checkbox is intended to assist investors in identifying transactions 
that warrant closer scrutiny, a larger window of time may potentially 
result in added attention for a number of transactions that are not as 
significant, reducing the value of the checkbox.\314\
---------------------------------------------------------------------------

    \314\ Cf. Rule 10b5-1 Adopting Release, supra note 18, at 80390 
(reducing the disclosure window for tabular reporting of option 
awards pursuant to Item 402(x) of Regulation S-K (17 CFR 229.402(x)) 
to address concerns about the potential disclosure of many routine 
option awards that are less likely to have been affected by material 
nonpublic information).
---------------------------------------------------------------------------

    We disagree with the commenter who stated that we should not impose 
a checkbox requirement for transactions close in time to a repurchase 
announcement because, the commenter asserted, such sales are only 
coincidences of the corporate calendar and thus cannot represent 
efforts by managers to profit from repurchases.\315\ As discussed 
above, and as noted by other commenters, the predictability of the 
corporate calendar may instead facilitate executive efforts to benefit 
personally from repurchases, and thus we continue to believe the 
checkbox is appropriate.\316\ For similar reasons, we disagree with the 
commenter who stated that the checkbox is not needed in the case of an 
executive whose trades would qualify for the affirmative defense under 
Rule 10b5-1, because such trades could not reflect nonpublic 
information,\317\ and the commenter that stated that the checkbox 
requirement should apply only to repurchase plans that are publicly 
announced and implemented.\318\ Because repurchases often occur at 
relatively predictable times in the corporate calendar, executives can 
schedule trades in advance to potentially benefit from those 
repurchases that do occur at such times.\319\
---------------------------------------------------------------------------

    \315\ See letter from Chamber II.
    \316\ See letters from Prof. Edmans and Prof. Jackson, Dr. Hu, 
and Dr. Zytnick.
    \317\ See letter from DLA Piper.
    \318\ See letter from Cravath (``We also do not believe that a 
checkbox requirement is appropriate in the context of repurchase 
plans that are not publicly announced.'').
    \319\ See letters from Prof. Edmans and Prof. Jackson, Dr. Hu, 
and Dr. Zytnick.
---------------------------------------------------------------------------

    Several commenters who opposed the proposed checkbox requirement 
asserted that the requirement is unnecessary,\320\ as it duplicates the 
existing Exchange Act section 16 disclosures for issuers that file on 
domestic forms.\321\ While the checkbox does provide information 
available in other disclosures, we believe that it would still be 
helpful to investors. The checkbox eliminates the need for investors to 
review Exchange Act section 16(a) filings to determine if any

[[Page 36025]]

officer or director has purchased or sold equity securities that are 
the subject of an issuer's share repurchase plan or program around the 
time of the announcement. Thus, while the relevant data about domestic 
issuers are available from other sources, the checkbox allows investors 
to focus their efforts on transactions that are the most likely to 
benefit from further analysis. Absent the checkbox, identifying the 
subset of filings presenting executive equity transactions close in 
time to a repurchase announcement would require an investor to manually 
cross-check numerous filings. Moreover, this information is necessary 
for investors in FPIs because Exchange Act section 16(a) does not apply 
to them.
---------------------------------------------------------------------------

    \320\ See, e.g., letters from ABA Committee, BrilLiquid, Chamber 
II, Cravath, DLA Piper, Quest, and Simpson Thacher.
    \321\ See, e.g., letters from ABA Committee, DLA Piper, and 
Simpson Thacher.
---------------------------------------------------------------------------

    In this regard, in the Proposing Release, the Commission drew no 
distinction between domestic issuers and FPIs with respect to the 
importance of disclosure regarding insider purchases and sales within 
ten business days before or after the announcement of an issuer 
repurchase plan or program. However, in applying the same proposed 
regulatory text to Form 20-F as to Item 703 of Regulation S-K and Form 
N-CSR, which referenced Exchange Act section 16 reporting, the proposed 
checkbox amendments to Form 20-F, as drafted, would not have resulted 
in any additional disclosures about insiders at FPIs because FPI 
securities are exempt from Exchange Act section 16 reporting.\322\ We 
appreciate the comments that noted this issue.\323\
---------------------------------------------------------------------------

    \322\ See 17 CFR 240.3a12-3.
    \323\ See, e.g., letters from CBA and Cravath.
---------------------------------------------------------------------------

    We continue to believe this information is as important for 
investors in FPIs as it is for investors in other issuers. Consistent 
with the way in which executive officers and directors are referenced 
in Form 20-F, the checkbox disclosure requirement will now refer to 
purchases and sales by any ``director [and] member of senior management 
who would be identified pursuant to Item 1 of Form 20-F'' instead of 
referencing officers and directors subject to the reporting 
requirements under section 16(a) of the Exchange Act. In addition, we 
are moving the checkbox from Form 20-F to Form F-SR because we believe 
the checkbox is most useful in conjunction with the daily quantitative 
repurchase disclosures, which we moved to Form F-SR for FPIs that file 
on the FPI forms. Therefore, FPIs will be required to check the box if 
an director or member of senior management who would be identified in 
Form 20-F pursuant to Item 1 purchased or sold shares or other units of 
the class of the issuer's equity securities that is the subject of an 
issuer share repurchase plan or program within four business days 
before or after the issuer's announcement of such repurchase plan or 
program. Because FPIs may elect to report using Forms 10-Q and 10-K, 
for those issuers the checkbox on those forms will include the Form 20-
F reference to directors or senior management.
    Other commenters opposed the proposed checkbox requirement because 
of the potential for misinterpretations or mischaracterizations,\324\ 
including that it could give the incorrect impression that insiders 
were trading securities because of the announcement instead of for 
other reasons, such as long-established Rule 10b5-1(c) plans \325\ or 
automatic sales to fund tax withholding on share vesting.\326\ To 
remedy any misunderstandings, some commenters suggested that the 
Commission should make certain acknowledgments \327\ or that the final 
amendments should allow issuers to include context for the checkbox to 
avoid any miscomprehension.\328\ We did not revise the final amendments 
in response to these comments because, in addition to the required 
disclosure of factual information, an issuer may include additional 
disclosure to provide context to investors, and would be required to do 
so if such additional disclosures are material and necessary to prevent 
the required disclosures from being misleading.\329\ In response to a 
commenter's suggestions,\330\ we are adopting amendments to clarify 
certain aspects of the checkbox requirement. If an issuer has multiple 
classes of stock, each with its own repurchase plan, the issuer is 
required to check the box in its periodic report if, during that 
period, a covered officer or director purchases or sells shares or 
other units of the class of the issuer's equity securities that is the 
subject of any issuer share repurchase plan or program within four 
business days before or after the issuer's announcement of such 
repurchase plan or program. Additionally, the issuer is required to 
check the box in its periodic report if, during that period, it 
announced an increase of an existing share repurchase plan because the 
announcement constitutes a new repurchase plan for purposes of the 
requirement.
---------------------------------------------------------------------------

    \324\ See, e.g., letters from ABA Committee, Chamber II, 
Cravath, Quest, and Vistra.
    \325\ See, e.g., letters from Cravath, DLA Piper, and PNC.
    \326\ See letter from PNC.
    \327\ See, e.g., letters from Cravath, DLA Piper, PNC, and 
Quest.
    \328\ See letter from ABA Committee.
    \329\ See Rule 12b-20.
    \330\ See letter from ABA Committee.
---------------------------------------------------------------------------

    Finally, in response to a commenter's request for 
clarification,\331\ we note that a domestic corporate issuer may rely 
on Forms 3, 4, and 5 filed with the Commission in determining if it 
should check the box provided that the reliance is reasonable. For 
example, an issuer would not be able to rely on those forms if the 
issuer knows or has reason to believe that a form was filed 
inappropriately or that a form should have been filed but was not. The 
amendments include a provision in new Item 601(b)(26) and new Item 
14(a)(iii) in Form N-CSR that permits an issuer to rely on Forms 3, 4, 
and 5 in determining whether to check the box. Form F-SR contains an 
analogous provision for FPIs. Because the securities of FPIs are exempt 
from section 16,\332\ however, Item 601(b)(26) and Form F-SR permit an 
FPI to rely on written representations from its directors and senior 
management provided that the reliance is reasonable.
---------------------------------------------------------------------------

    \331\ See id.
    \332\ See 17 CFR 240.3a12-3.
---------------------------------------------------------------------------

C. Clarifying Amendments

1. Proposed Amendments
    In the Proposing Release, the Commission proposed clarifying 
amendments to Item 703 of Regulation S-K, Form 20-F, and Form N-CSR to 
simplify application of the rules and remove unnecessary instructions. 
Specifically, the Commission proposed:
     To relocate guidance in the Instruction 1 to paragraph 
(b)(1) about information to appear in the table and disclosure to 
appear in a footnote to the table to paragraph (b)(1) to a new 
paragraph (c);
     To consistently refer to ``issuer'' instead of 
``company''; \333\
---------------------------------------------------------------------------

    \333\ In Form N-CSR only we would continue to refer to 
``registrants'' rather than ``issuer'' or ``company'' for 
consistency with other provisions in Form N-CSR.
---------------------------------------------------------------------------

     To remove Instructions 1 and 2 in the Instructions to 
paragraphs (b)(3) and (b)(4) and effectuate those instructions by 
adding ``aggregate'' to the total number of shares for all plans or 
programs publicly announced in paragraph (b)(3) in lieu of Instruction 
1 and adding proposed paragraph (c) to replace Instruction 2; and
     To delete the Instruction to the affected requirements as 
they are clear that all purchases, including those that do not satisfy 
the conditions of Rule 10b-18, are included.

[[Page 36026]]

2. Comments on the Proposed Amendments
    We did not receive any comments on these proposed clarifying 
amendments.
3. Final Amendments
    We are adopting the clarifying amendments as proposed except that 
the reference to new proposed Item 703(c) is now new final Item 703(a).

D. New Item 408(d)

1. Proposed Amendments
    In January 2022, the Commission proposed amendments concerning Rule 
10b5-1 and insider trading.\334\ Among other matters, the Commission 
proposed new disclosure requirements regarding the adoption, 
modification, and termination of Rule 10b5-1 plans and certain other 
similar trading arrangements by issuers, directors, and officers. 
Specifically, the Commission proposed new Item 408(a) of Regulation S-K 
to require certain issuers \335\ to disclose:
---------------------------------------------------------------------------

    \334\ See Rule 10b5-1 Proposing Release, supra note 17.
    \335\ The proposed Item 408(a) of Regulation S-K disclosure 
would not apply to registered investment companies or asset-backed 
issuers (as defined in 17 CFR 229.1101). See 10b5-1 Adopting 
Release, supra note 18, at 80409 note 481.
---------------------------------------------------------------------------

     Whether, during its most recently completed fiscal quarter 
(the issuer's fourth fiscal quarter in the case of an annual report), 
the issuer adopted or terminated any contract, instruction, or written 
plan to purchase or sell its securities, whether or not intended to 
satisfy the affirmative defense conditions of Rule 10b5-1(c), and a 
description of the material terms of the contract, instruction or 
written plan, including:
    [cir] The date of adoption or termination;
    [cir] The duration of the contract, instruction, or written plan; 
and
    [cir] The aggregate amount of securities to be sold or purchased 
pursuant to the contract, instruction, or written plan.
    The Commission also proposed to require issuers to disclose similar 
information regarding the use of such trading arrangements by its 
directors and officers (as defined in 17 CFR 240.16a-1(f) (Rule 16a-
1(f))).
    Under the proposed rule, the disclosures would be required in Forms 
10-Q and 10-K, as applicable, and tagged using Inline XBRL. Issuers 
would be required to provide this information if, during the quarterly 
period covered by the report, the issuer, or any director or officer 
who is required to file reports under Exchange Act section 16,\336\ 
adopted or terminated a Rule 10b5-1 plan.
---------------------------------------------------------------------------

    \336\ 15 U.S.C. 78p.
---------------------------------------------------------------------------

    In December 2022,\337\ the Commission adopted certain aspects of 
the Rule 10b5-1 Proposing Release, including the proposed disclosure 
requirements with respect to the use of pre-planned trading 
arrangements by an issuer's directors and officers. In response to 
commenters, the Commission revised the final rule to exclude disclosure 
of pricing information. At that time, the Commission did not adopt the 
proposal to require corresponding disclosure regarding the use of such 
trading arrangements by the issuer of the security. The Commission 
noted that, in light of the various comments received on this aspect of 
the proposal, further consideration of the potential application of the 
disclosure requirement for purchases of equity securities by the issuer 
was warranted.
---------------------------------------------------------------------------

    \337\ See Rule 10b5-1 Adopting Release, supra note 18.
---------------------------------------------------------------------------

2. Comments on the Proposed Amendments
    Several commenters on the Rule 10b5-1 Proposing Release \338\ 
supported, as a general matter, the proposed requirement for quarterly 
reporting of Rule 10b5-1(c) and non-Rule 10b5-1(c) trading arrangements 
because such disclosure could provide useful information to investors 
and the markets.\339\ One commenter \340\ asserted that the proposed 
disclosures would provide long-term shareholders with information that 
completes the partial picture about trading by insiders provided by 17 
CFR 239.144 (``Form 144'') and Exchange Act section 16 reports.\341\ 
Commenters were generally divided in their recommendations of what 
trading arrangement information should be disclosed.\342\
---------------------------------------------------------------------------

    \338\ Comments on the Rule 10b5-1 Proposing Release can be found 
at https://www.sec.gov/comments/s7-20-21/s72021.htm.
    \339\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Anthony O'Reilly (Mar. 30, 2022); Better 
Markets (Apr. 1, 2022); Colorado Public Employees' Retirement 
Association (Mar. 29, 2022); Council of Institutional Investors 
(Mar. 24, 2022); DLA Piper (Apr. 1, 2022); International Corporate 
Governance Network (Mar. 31, 2022); North American Securities 
Administrators Association, Inc. (Apr. 1, 2022); and Simpson Thacher 
& Bartlett LLP (Mar. 31, 2022).
    \340\ See letter in response to the Rule 10b5-1 Proposing 
Release from Council of Institutional Investors (Mar. 24, 2022).
    \341\ Currently, with the exception of the Rule 10b5-1 
representation included in Form 144, there are no disclosure 
obligations regarding the use of Rule 10b5-1 trading arrangements. 
See letter in response to the Rule 10b5-1 Proposing Release from 
American Federation of Labor and Congress of Industrial 
Organizations (Apr. 1, 2022).
    \342\ One commenter in response to the Rule 10b5-1 Proposing 
Release stated that the final rule should not require disclosure of 
the number of shares covered by a trading arrangement and the 
duration of the arrangement. See letter in response to the Rule 
10b5-1 Proposing Release from Quest Diagnostics Inc. (Apr. 1, 2022). 
Some commenters recommended the required disclosures should be 
limited to the person adopting the plan, the date of adoption or 
termination, and duration. See, e.g., letters in response to the 
Rule 10b5-1 Proposing Release from Fenwick & West (Mar. 31, 2022) 
and Shearman & Sterling LLP (Apr. 1, 2022). Other commenters in 
response to the Rule 10b5-1 Proposing Release recommended that the 
Commission not require disclosure of the termination of a trading 
arrangement because issuers may terminate a trading arrangement in 
advance of announcement of a significant corporate transaction, such 
as a merger, and that such plan terminations, if disclosed, could 
signal the market. See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Sullivan & Cromwell LLP (Apr. 1, 2022) and 
Securities Industry and Financial Markets Association, Kevin Carroll 
(Apr. 1, 2022).
---------------------------------------------------------------------------

    Other commenters did not support the proposed reporting 
requirements as a general matter.\343\ A number of commenters expressed 
concern regarding the requirement for issuers to provide a description 
of the ``material terms'' of any Rule 10b5-1 trading arrangement \344\ 
because issuers might interpret this to include specific details of a 
trading arrangement, such as pricing information.\345\ Several 
commenters stated that the disclosure of pricing information and other 
details of a Rule 10b5-1 trading arrangement could expose issuers and 
their insiders to strategic trades.\346\ A number of

[[Page 36027]]

commenters also recommended that the Commission not require disclosure 
regarding non-Rule-10b5-1 trading arrangements \347\ because it would 
not provide valuable information to investors, the Commission, or other 
market participants.\348\ Moreover, one commenter suggested the 
Commission exempt SRCs from the proposed disclosure requirement.\349\
---------------------------------------------------------------------------

    \343\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from ACCO Brands Corp. (Mar. 31, 2022); Committee 
on Securities Law of the of the Business Law Section of the Maryland 
State Bar (Apr., 2022); International Bancshares Corporation (Apr. 
1, 2022); National Association of Manufacturers (Apr. 1, 2022); 
National Venture Capital Association (Apr. 1, 2022); Society for 
Corporate Governance (Apr. 1, 2022); Sullivan & Cromwell LLP (Apr. 
1, 2022); and Wilson, Sonsini, Goodrich & Rosati (Apr. 11, 2022).
    \344\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Cleary, Gottlieb, Steen & Hamilton LLP (Mar. 
23, 2022); Davis Polk & Wardwell LLP (Mar. 28, 2022); DLA Piper 
(Apr. 1, 2022); Federal Regulation of Securities Committee of the 
Business Law Section of the American Bar Association (Apr. 29, 
2022); FedEx Corporation (Apr. 1, 2022); Fenwick & West (Mar. 31, 
2022); Kirkland & Ellis (Apr. 1, 2022); National Association of 
Manufacturers (Apr. 1, 2022); National Venture Capital Association 
(Apr. 1, 2022); Quest Diagnostics Inc. (Apr. 1, 2022); Securities 
Industry and Financial Markets Association, Joseph P. Corcoran (Apr. 
1, 2022); Society for Corporate Governance (Apr. 1, 2022); Sullivan 
& Cromwell LLP (Apr. 1, 2022); and Wilson, Sonsini, Goodrich & 
Rosati (Apr. 11, 2022).
    \345\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Cleary, Gottlieb, Steen & Hamilton LLP (Mar. 
23, 2022); Davis Polk & Wardwell LLP (Mar. 28, 2022); DLA Piper 
(Apr. 1, 2022); Federal Regulation of Securities Committee of the 
Business Law Section of the American Bar Association (Apr. 29, 
2022); Fenwick & West (Mar. 31, 2022); Quest Diagnostics Inc. (Apr. 
1, 2022); Securities Industry and Financial Markets Association, 
Joseph P. Corcoran (Apr. 1, 2022); Society for Corporate Governance 
(Apr. 1, 2022); and Wilson, Sonsini, Goodrich & Rosati (Apr. 11, 
2022).
    \346\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Davis Polk & Wardwell LLP (Mar. 28, 2022); 
DLA Piper (Apr. 1, 2022); Fenwick & West (Mar. 31, 2022); National 
Venture Capital Association (Apr. 1, 2022); Securities Industry and 
Financial Markets Association, Joseph P. Corcoran (Apr. 1, 2022); 
Society for Corporate Governance (Apr. 1, 2022); and Wilson, 
Sonsini, Goodrich & Rosati (Apr. 11, 2022).
    \347\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Cleary, Gottlieb, Steen & Hamilton LLP (Mar. 
23, 2022); Shearman & Sterling LLP (Apr. 1, 2022); Simpson Thacher & 
Bartlett LLP (Mar. 31, 2022); and Sullivan & Cromwell LLP (Apr. 1, 
2022).
    \348\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Cleary, Gottlieb, Steen & Hamilton LLP (Mar. 
23, 2022); Cravath, Swaine & Moore LLP (Mar. 28, 2022); and Simpson 
Thacher & Bartlett LLP (Mar. 31, 2022).
    \349\ See letter in response to the Rule 10b5-1 Proposing 
Release from Maryland Bar (claiming that SRCs and their insiders are 
less likely to engage in the kinds of trading in the securities of 
their companies that would cause concern, but these issuers could be 
disproportionately impacted by the reporting burden).
---------------------------------------------------------------------------

    A few commenters to the Rule 10b5-1 Proposing Release recommended 
that the disclosure requirements regarding issuer trading arrangements 
be considered in the context of this rulemaking.\350\ One of these 
commenters suggested specifically that information relating to issuer 
use of Rule 10b5-1 plans could be moved to Item 703 to consolidate 
issuer reporting of share repurchases.\351\
---------------------------------------------------------------------------

    \350\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Cravath, Swaine & Moore LLP (Mar. 31, 2022) 
and Simpson Thacher & Bartlett LLP (Mar. 31, 2022).
    \351\ See letter in response to the Rule 10b5-1 Proposing 
Release from Simpson Thacher & Bartlett LLP (Mar. 31, 2022.
---------------------------------------------------------------------------

3. Final Amendments
    Consistent with the Rule 10b5-1 Adopting Release,\352\ we are 
adopting new Item 408(d) of Regulation S-K, to better allow investors, 
the Commission, and other market participants to observe how issuers 
use Rule 10b5-1 plans. The information also will add important context 
for interpreting other disclosures, including the other disclosures we 
are adopting in this release, which should help investors value the 
issuer's shares and make more informed investment decisions. As noted 
above, in the Rule 10b5-1 Adopting Release, the Commission stated that 
further consideration of potential application of the disclosure 
requirements for purchases of equity securities by the issuer was 
warranted. Upon further consideration, and in response to issues raised 
by commenters, we believe that the Item 408(a) disclosure that was 
proposed for issuers in the Rule 10b5-1 Proposing Release will 
complement the disclosures concerning issuer repurchases that we are 
adopting in this release and allow investors to better evaluate issuer 
repurchases. Therefore, we are adopting new Item 408(d) in this 
release. New Item 408(d) substantially mirrors the proposed Item 408(a) 
of Regulation S-K disclosure requirement with respect to the issuer's 
adoption or termination of a contract, instruction, or written plan to 
purchase or sell its own securities that is intended to satisfy the 
affirmative defenses conditions of Rule 10b5-1(c).
---------------------------------------------------------------------------

    \352\ See Rule 10b5-1 Adopting Release, supra note 18.
---------------------------------------------------------------------------

    In a change from the proposal, however, issuers will not be 
required to disclose information about the adoption or termination of 
any trading arrangement for the purchase or sale of securities of the 
issuer that meets the requirements of a non-Rule 10b5-1 trading 
arrangement as defined in Item 408(c). Because plans that would qualify 
for the affirmative defense under Rule 10b5-1 offer issuers enhanced 
protection from potential liability, in addition to other potential 
benefits, and are considerably more flexible for issuers than for 
insiders, we believe that issuers are incentivized to use trading 
arrangements that satisfy the conditions of Rule 10b5-1(c).\353\ We 
also agree with commenters who said that information about the issuer's 
trading arrangements, other than those intended to qualify for the 
affirmative defense, has more limited value to investors or other 
market participants than information about such trading arrangements 
for insiders.\354\ While issuers may not have reason to specifically 
disclose their use of a 10b5-1 plan, we understand that issuers 
generally have significant incentives to announce their repurchase 
plans, so that mandating disclosure of non-10b5-1 plans would not 
typically provide investors with significant new information.
---------------------------------------------------------------------------

    \353\ The issuer of a security that relies on the recently 
amended Rule 10b5-1(c)(1) affirmative defense will not be subject to 
a cooling-off period, any limitation on the use of multiple 
overlapping plans, or any limitation on the use of single-trade 
plans. See Rule 10b5-1(c)(1)(ii)(B), (D), and (E).
    \354\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Cleary, Gottlieb, Steen & Hamilton LLP (Mar. 
23, 2022); Cravath, Swaine & Moore LLP (Mar. 28, 2022); and Simpson 
Thacher & Bartlett LLP (Mar. 31, 2022).
---------------------------------------------------------------------------

    New Item 408(d) will require an issuer to disclose whether, during 
its most recently completed fiscal quarter (the issuer's fourth fiscal 
quarter in the case of an annual report), the issuer adopted or 
terminated a contract, instruction, or written plan to purchase or sell 
its securities intended to satisfy the affirmative defense conditions 
of Rule 10b5-1(c). Issuers are also required to provide a description 
of the material terms of the contract, instruction, or written plan 
(other than terms with respect to the price at which the party 
executing the respective trading arrangement is authorized to trade), 
such as:
     The date on which the registrant adopted or terminated the 
Rule 10b5-1 trading arrangement;
     The duration of the Rule 10b5-1 trading arrangement; and
     The aggregate number of securities to be purchased or sold 
pursuant to the Rule 10b5-1 trading arrangement.
    In response to comments and consistent with our approach to the 
recently adopted Item 408(a) of Regulation S-K,\355\ we have revised 
the final rule to clarify that new Item 408(d) does not require 
disclosure of the price at which the party executing the trading 
arrangement is authorized to trade. We agree with commenters that 
disclosing pricing information could allow other persons to trade 
strategically in anticipation of planned trades.\356\ As proposed, 
issuers will be required to disclose this information in their 
quarterly reports on Form 10-Q and Form 10-K (for the issuer's fourth 
fiscal quarter), and tag the information using Inline XBRL.\357\ 
Moreover, while we are aware of the potential for a disproportionate 
impact on SRCs, we believe that exempting them from this disclosure 
requirement would deprive investors in those issuers of material 
information about the use of Rule 10b5-1 plans.\358\
---------------------------------------------------------------------------

    \355\ See Rule 10b5-1 Adopting Release, supra note 18.
    \356\ See, e.g., letters in response to the Rule 10b5-1 
Proposing Release from Davis Polk & Wardwell LLP (Mar. 28, 2022); 
DLA Piper (Apr. 1, 2022); Fenwick & West (Mar. 31, 2022); National 
Venture Capital Association (Apr. 1, 2022); Securities Industry and 
Financial Markets Association, Joseph P. Corcoran (Apr. 1, 2022); 
Society for Corporate Governance (Apr. 1, 2022); and Wilson, 
Sonsini, Goodrich & Rosati (Apr. 11, 2022).
    \357\ The Commission did not propose to require FPIs to provide 
the Item 408(a) of Regulation S-K disclosure because they do not 
file quarterly reports, but it requested comment on whether such a 
requirement should apply to them. See Rule 10b5-1 Proposing Release, 
supra note 17, at Question # 26. No comments were received on this 
point.
    \358\ As proposed, see supra note 335, the final amendments do 
not apply to asset-backed securities issuers. Therefore, for clarity 
we are making a technical amendment to Instruction J of Form 10-K to 
allow asset-backed securities issuers to omit Item 408 disclosures. 
Instruction J of Form 10-K includes a list of Item requirements that 
may be omitted for asset-backed securities issuers.

---------------------------------------------------------------------------

[[Page 36028]]

    Although there may be some overlap in the disclosure provided 
pursuant to new Item 408(d) and the disclosure provided pursuant to the 
amendment to Item 703 of Regulation S-K about an issuer's Rule 10b5-
1(c) trading arrangements adopted during the prior fiscal quarter, new 
Item 408(d) would complement the new Item 703 disclosure. The 
disclosure requirement in Item 703 will be triggered only if an issuer 
had conducted a share repurchase in the prior fiscal quarter. In 
contrast, Item 408(d) will require disclosure if a Rule 10b5-1 plan was 
adopted or terminated, regardless of whether a share repurchase 
transaction pursuant to that plan actually occurred during the prior 
fiscal quarter that is covered in the Form 10-Q or Form 10-K (for the 
issuer's fourth fiscal quarter). To prevent potential duplicative 
disclosures, we are adding a note to Item 408(d)(1), which states that, 
if the disclosure provided pursuant to Item 703 contains disclosure 
that would satisfy the requirements of Item 408(d)(1), a cross-
reference to that disclosure will satisfy the Item 408(d)(1) 
requirements.

E. Structured Data Requirement

1. Proposed Amendments
    The Commission proposed to require issuers to tag the 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 in a structured, machine-readable 
data language. Specifically, under the proposed rules issuers would be 
required to tag the disclosures in Inline XBRL in accordance with 17 
CFR 232.405 (``Rule 405 of Regulation S-T'') and the EDGAR Filer 
Manual.\359\ The proposed requirements would include detail tagging of 
quantitative amounts disclosed within the tabular disclosures in each 
of the aforementioned forms, as well as block text tagging and detail 
tagging of narrative and quantitative information disclosed in the 
footnotes to the tables required by Item 703 of Regulation S-K, Item 
16E of Form 20-F, and Item 14 of Form N-CSR.
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    \359\ This tagging requirement would be implemented by including 
cross-references to Rule 405 of Regulation S-T in each of the 
repurchase disclosure provisions, and by revising Rule 405(b) of 
Regulation S-T to include the proposed repurchase disclosures. 
Pursuant to 17 CFR 232.301 (``Rule 301 of Regulation S-T''), the 
EDGAR Filer Manual is incorporated by reference into the 
Commission's rules. In conjunction with the EDGAR Filer Manual, 
Regulation S-T governs the electronic submission of documents filed 
with the Commission. Rule 405 of Regulation S-T specifically governs 
the scope and manner of disclosure tagging requirements for 
corporate issuers and investment companies, including the 
requirement in Rule 405(a)(3) to use Inline XBRL as the specific 
structured data language to use for tagging the disclosures.
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2. Comments on the Proposed Amendments
    Most of the commenters who discussed requiring issuers to tag the 
information that would be disclosed in the proposed amendments 
supported the requirement because they asserted that it would improve 
the usability of the data.\360\ One commenter noted its concern that 
the tagging requirement would be unnecessary and costly.\361\ Another 
commenter objected to tagging the narrative disclosure and suggested 
limiting the tagging requirement to quantitative repurchase 
disclosures.\362\ One commenter asked the Commission to exempt FPIs 
from this tagging requirement because their home country may not have a 
similar requirement, so tagging would constitute an additional burden 
on those issuers.\363\
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    \360\ See, e.g., letters from Better Markets I, CalPERS, CFA 
Institute, CII, ICGN, NASAA, and XBRL US.
    \361\ See letter from NYC Bar.
    \362\ See letter from Cravath.
    \363\ See letter from VEUO (``FPIs may already be subject to 
home country requirements with respect to disclosure of share 
repurchases. Such home country requirements will almost certainly 
not require preparation of structured data with the same content and 
format as the Form SR Requirement. As a result, the structured data 
requirement would represent an additional and unnecessary 
administrative burden on FPIs'').
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3. Final Amendments
    We are adopting, as proposed, final amendments to require issuers 
to tag the information disclosed pursuant to Items 601 and 703 of 
Regulation S-K, Item 16E of Form 20-F, Item 14 of Form N-CSR, and Form 
F-SR in a structured, machine-readable data language in accordance with 
Rule 405 of Regulation S-T and the EDGAR Filer Manual. The final 
amendments require detail tagging of the quantitative amounts disclosed 
within the required tabular disclosures and block text tagging and 
detail tagging of required narrative and quantitative information. As 
certain commenters noted, requiring XBRL tagging in this manner would 
``make the information provided most useful by making the data easier 
to review and compare electronically'' \364\ and doing so ``would both 
enhance the utility of the information for investors and lower their 
costs to gather'' that information.\365\
---------------------------------------------------------------------------

    \364\ See letter from CalPERS.
    \365\ See letter from CII.
---------------------------------------------------------------------------

    We continue to believe that requiring Inline XBRL tagging of the 
repurchase disclosures is beneficial because it makes them more readily 
available and easily accessible to investors, market participants, and 
others for aggregation, comparison, filtering, and other analysis, as 
compared to requiring a non-machine readable data language such as 
ASCII or HTML. This requirement also enables automated extraction and 
analysis of granular data on actual repurchases, allowing investors and 
other market participants to more efficiently perform large-scale 
analysis and comparison of repurchases across issuers and time periods, 
including comparing repurchases to information on executive's 
compensation.\366\ At the same time, contrary to one commenter's 
assertion that the Inline XBRL requirements would impose significant 
unnecessary and significant compliance costs on issuers,\367\ we do not 
expect the incremental compliance burden associated with tagging the 
additional information to be unduly burdensome, because issuers subject 
to the tagging requirements, including FPIs, are subject to similar 
Inline XBRL requirements in other Commission filings.\368\ Moreover, as 
a result of the tagging requirements, investors can aggregate or 
manipulate the data to display monthly data that they are used to 
reviewing.
---------------------------------------------------------------------------

    \366\ These considerations are generally consistent with 
objectives of the recently enacted Financial Data Transparency Act 
of 2022, which directs the establishment by the Commission and other 
financial regulators of data standards for collections of 
information, including with respect to periodic and current reports 
required to be filed or furnished under Exchange Act sections 13 and 
15(d). Such data standards would need to meet specified criteria 
relating to openness and machine-readability and promote 
interoperability of financial regulatory data across members of the 
Financial Stability Oversight Council. See James M. Inhofe National 
Defense Authorization Act for Fiscal Year 2023, Public Law 117-263, 
tit. LVIII, 136 Stat. 2395, 3421-39 (2022).
    \367\ See letter from NYC Bar.
    \368\ Inline XBRL requirements for Listed Closed-End Funds and 
business development companies took effect beginning August 1, 2022 
(for seasoned issuers) and February 1, 2023 (for all other issuers).
---------------------------------------------------------------------------

F. Compliance Dates

    FPIs that file on the FPI forms will be required to comply with the 
new disclosure and tagging requirements in new Form F-SR beginning with 
the Form F-SR that covers the first full fiscal quarter that begins on 
or after April 1, 2024. The Form 20-F narrative disclosure that relates 
to the Form F-SR filings, which is required by Item 16E of that form, 
and the related tagging requirements will be required starting in the 
first Form 20-F filed after their first Form F-SR has been filed. 
Listed Closed-End Funds will be required to

[[Page 36029]]

comply with the new disclosure and tagging requirements in their 
Exchange Act periodic reports beginning with the Form N-CSR that covers 
the first six-month period that begins on or after January 1, 2024. All 
other issuers will be required to comply with the new disclosure and 
tagging requirements in their Exchange Act periodic reports on Forms 
10-Q and 10-K (for their fourth fiscal quarter) beginning with the 
first filing that covers the first full fiscal quarter that begins on 
or after October 1, 2023.\369\
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    \369\ For example, the compliance dates for a registrant with a 
December 31, 2023 fiscal year end is as follows: (1) Issuers that 
file periodic reports on Forms 10-Q and 10-K will be required to 
begin complying with the new disclosure and tagging requirements in 
their Form 10-K for the fiscal year ending on December 31, 2023 as 
it relates to repurchases made during the quarter ending December 
31, 2023; (2) FPIs that report using Form 20-F will be required to 
begin filing new Form F-SR for the quarter ending June 30, 2024; and 
(3) Listed Closed-End Funds will be required to begin complying with 
the new disclosure and tagging requirements in Form N-CSR for the 
six-month period ending on June 30, 2024.
---------------------------------------------------------------------------

IV. Other Matters

    If any of the provisions of these rules, or the application thereof 
to any person or circumstance, is held to be invalid, such invalidity 
shall not affect other provisions or application of such provisions to 
other persons or circumstances that can be given effect without the 
invalid provision or application. Pursuant to the Congressional Review 
Act,\370\ the Office of Information and Regulatory Affairs has 
designated these amendments a ``major rule,'' as defined by 5 U.S.C. 
804(2).
---------------------------------------------------------------------------

    \370\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

V. Economic Analysis

    We are mindful of the costs imposed by, and the benefits derived 
from, our rules. Section 3(f) of the Exchange Act \371\ and section 
2(c) of the Investment Company Act of 1940 (``Investment Company Act'') 
\372\ require us, when engaging in rulemaking, to consider or determine 
whether an action is necessary or appropriate in (or, with respect to 
the Investment Company Act, consistent with) the public interest, and 
to consider, in addition to the protection of investors, whether the 
action will promote efficiency, competition, and capital formation. In 
addition, 15 U.S.C. 78w(a)(2) (section 23(a)(2) of the Exchange Act) 
requires the Commission to consider the effects on competition of any 
rules the Commission adopts under the Exchange Act and prohibits the 
Commission from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act.\373\
---------------------------------------------------------------------------

    \371\ 15 U.S.C. 78c(f).
    \372\ 15 U.S.C. 80a-2(c).
    \373\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    We have considered the economic effects of the amendments, 
including their effects on competition, efficiency, and capital 
formation. Many of the effects discussed below cannot be quantified. 
Consequently, while we have, wherever possible, attempted to quantify 
the economic effects expected from these amendments, much of the 
discussion remains qualitative in nature. Where we are unable to 
quantify the economic effects of the final amendments, we provide a 
qualitative assessment of the potential effects.
    As discussed in greater detail in Sections I and III above, the 
final amendments include a requirement to disclose historical daily 
repurchase activity in an exhibit to Forms 10-K and 10-Q (for corporate 
issuers that report on domestic forms), on Form N-CSR (for Listed 
Closed-End Funds), and on new quarterly Form F-SR for FPIs reporting on 
the FPI forms (due to be filed within 45 days after the end of the 
respective quarter). This disclosure, which is required to be 
structured using Inline XBRL, includes the number of shares repurchased 
by an issuer, the average price per share paid, total number of shares 
purchased as part of publicly announced plans or programs, the maximum 
number (or approximate dollar value) of shares that may yet be 
repurchased under the publicly announced plans or programs, number of 
shares repurchased on the open market, the number of shares intended to 
qualify for the Rule 10b-18 non-exclusive safe harbor, and the number 
of shares repurchased pursuant to a Rule 10b5-1 plan. This disclosure 
will be required to be filed, rather than furnished.
    The final amendments also require additional disclosure on Forms 
10-Q, 10-K, 20-F, and N-CSR about the issuer's repurchase program and 
practices, including the objectives or rationales for the share 
repurchases, the process or criteria used to determine the amount of 
repurchases, and whether purchases were made pursuant to a plan that is 
intended to satisfy the affirmative defense conditions of Rule 10b5-
1(c), or intended to qualify for the Rule 10b-18 non-exclusive safe 
harbor. In addition, the final amendments eliminate the requirement in 
Item 703 of Regulation S-K that issuers disclose their monthly 
repurchase data in their periodic reports. Further, the final 
amendments require disclosure of 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 restrictions on 
such transactions. Further, the amendments also require an issuer to 
indicate whether certain officers or directors purchased or sold shares 
or other units of the class of the issuer's equity securities that is 
the subject of an issuer share repurchase plan or program within four 
business days before or after the issuer's public announcement of such 
repurchase plan or program. Finally, the amendments add new quarterly 
disclosure in periodic reports on Forms 10-K and 10-Q related to an 
issuer's adoption and termination of certain trading arrangements. The 
final amendments require the additional disclosures to be structured 
using Inline XBRL.

A. Baseline and Affected Parties

1. Affected Parties
    Repurchase disclosures are currently required by Item 703 of 
Regulation S-K (on Forms 10-Q and 10-K), Item 16E of Form 20-F, and 
Item 14 of Form N-CSR (for Listed Closed-End Funds). The disclosure is 
required with respect to any 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 is registered pursuant to 
section 12 of the Exchange Act. Based on staff analysis of EDGAR 
filings for calendar year 2021, the amendments will affect the same 
categories of issuers, including approximately 6,700 issuers with a 
class of securities registered under section 12 that file on Forms 10-Q 
and 10-K and approximately 800 issuers with a class of securities 
registered under section 12 that file on Form 20-F.\374\ In addition, 
based on staff analysis of Morningstar Direct data for 2021, 
approximately 500 Listed Closed-End Funds are expected to be affected 
by the amendments to Form N-CSR. We lack the data to estimate the 
number of affected ``affiliated purchasers.''
---------------------------------------------------------------------------

    \374\ Registered investment companies (but not business 
development companies) and asset-backed securities issuers are 
excluded from the count of operating companies cited above. We refer 
to FPIs that file on Form 20-F as FPIs in this section for brevity, 
unless specified otherwise. Only FPIs that file on Form 20-F are 
subject to the amendments. MJDS filers that file on Form 40-F are 
not subject to the amendments. See MJDS Release, supra note 219.
---------------------------------------------------------------------------

    Among the issuers described above, issuers that recently engaged in 
repurchases are most likely to be affected by the final 
amendments.\375\

[[Page 36030]]

Based on data from Compustat and EDGAR filings for fiscal years ending 
between January 1, 2021, and December 31, 2021, we estimate that 
approximately 3,600 corporate issuers that conducted repurchases would 
be more directly affected by the amendments (among them, approximately 
300 Form 20-F filers).\376\ In addition, based on staff analysis of 
Form N-CEN filings for 2021, approximately 100 Listed Closed-End Funds 
conducted repurchases.\377\ Based on these estimates, most of the 
affected issuers are corporate issuers that file periodic reports on 
domestic forms.
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    \375\ Issuers with no repurchases today could be affected by the 
amendments to the extent they were planning future repurchases and 
such plans were affected by the costs of the additional disclosure 
requirements.
    \376\ As a caveat, a complete estimate of the number of affected 
issuers is limited by data coverage. A source of data commonly used 
in existing studies, Standard & Poor's Compustat, has limited 
coverage of small and unlisted issuers and FPIs. Therefore, we 
supplement Compustat Fundamentals Annual data (version retrieved 
June 27, 2022) with structured data from financial statement 
disclosures in EDGAR filings (retrieved June 27, 2022), with the 
caveat that variation in filer use of tags to characterize their 
repurchases may result in some data noise.
    \377\ Based upon a staff review, we expect approximately 20 
percent of Listed Closed-End Funds to be affected by the amendments 
to engage in share repurchases, as compared to approximately half of 
corporate issuers.
---------------------------------------------------------------------------

    New Item 408(d) will affect issuers that undertake share 
repurchases through Rule 10b5-1 plans. Data on issuers' use of such 
plans are very limited. Some issuers voluntarily disclose their use of 
Rule 10b5-1 plans to carry out stock repurchases on Form 8-K or in 
periodic reports. Such voluntary reporting is likely to underestimate 
the number of affected issuers. Nevertheless, in the current disclosure 
regime, it is the most direct source of information on the prevalence 
of Rule 10b5-1 plan repurchases. One study examining different 
repurchase methods identified ``at least 200 announcements of 
repurchases using Rule 10b5-1 [plans] per year from 2011 to 2014'' and 
found that ``[In 2014] 29% [of repurchase announcements] included a 
10b5-1 plan.'' \378\ Based on a textual search of calendar year 2021 
filings, we estimate that approximately 210 issuers (excluding asset-
backed issuers) disclosed share repurchase programs executed under a 
Rule 10b5-1 plan.\379\
---------------------------------------------------------------------------

    \378\ See Bonaim[eacute] et al. (2020), supra note 58.
    \379\ The estimate is based on a textual search of calendar year 
2021 filings of Forms 10-K, 10-Q, 8-K, as well as amendments and 
exhibits thereto in Intelligize. The estimate is based on a textual 
search using keywords ``10b5-1 repurchases'' or a combination of 
keywords ``repurchase plan'' and ``10b5-1'' (the approach used in 
the Proposing Release estimate). Due to a lack of standardized 
presentation and the unstructured (i.e., non-machine-readable) 
nature of the disclosure, these estimates are approximate and may be 
over- or under-inclusive. Asset-backed issuers are not subject to 
new Item 408(d). See supra note 358.
---------------------------------------------------------------------------

    Another, indirect approach to estimating the number of affected 
issuers involves extrapolating the number of companies conducting 
repurchases under Rule 10b5-1 plans in a given year from a combination 
of the incidence of Rule 10b5-1 plan use among voluntarily announced 
repurchases (estimated at 29 percent as previously noted \380\) and the 
overall number of companies conducting repurchases based on their 
financial statements.\381\ Based on data from Compustat and EDGAR 
filings for fiscal years ending between January 1, 2021, and December 
31, 2021, we estimate that approximately 3,600 operating companies 
(excluding asset-backed issuers) conducted repurchases, yielding an 
estimate of approximately 1,000 companies affected by the Item 408(d) 
amendments.\382\ Item 408(d) does not apply to Listed Closed-End Funds.
---------------------------------------------------------------------------

    \380\ See Bonaim[eacute] et al. (2020), supra note 58.
    \381\ Using the number of issuers that announce repurchases in a 
given year would underestimate the number significantly because 
issuers may continue to implement a previously announced repurchase 
program over multiple years.
    \382\ As a caveat, a complete estimate of the number of affected 
issuers is limited by data coverage. A source of data commonly used 
in existing studies, Standard & Poor's Compustat, has limited 
coverage of small and unlisted registrants and foreign private 
issuers. Therefore, we supplemented Standard & Poor's Compustat 
Fundamentals Annual data (version retrieved June 27, 2022) with 
structured data from financial statement disclosures in EDGAR 
filings (retrieved June 27, 2022), with the caveat that variation in 
filer use of tags to characterize their repurchases may result in 
some data noise. 29 percent x 3600 = 1,044 ~ 1,000.
---------------------------------------------------------------------------

    Investors will also be affected by the final amendments to the 
extent that they benefit from the additional insight into an issuer's 
repurchase activity (and bear any costs of analyzing the additional 
disclosure). Financial intermediaries that execute repurchases at the 
issuer's instruction will also be affected by these amendments to the 
extent that they prepare the information necessary for an issuer's 
responsive disclosure, and indirectly, to the extent that the 
amendments affect the incidence of repurchases and thus demand for 
financial intermediaries' services in connection with executing 
repurchases. The amendments will also impact officers and directors to 
the extent that issuers establish policies or procedures imposing 
restrictions on transactions during a repurchase program. Officers and 
directors (particularly, in the case of FPIs whose senior management 
and directors are not subject to section 16 reporting obligations) may 
also be affected by having to provide issuers with information about 
their trades. We lack data to assess how many of these parties will be 
affected.
2. Baseline
    Many studies, spanning decades, examine the motivation for 
corporate payout decisions, repurchases among them.\383\ Based on data 
for 2021, share repurchases of U.S.-listed companies
---------------------------------------------------------------------------

    \383\ For a more detailed discussion of the data and research on 
repurchases and other payouts, see 2020 Staff Study; and Farre-Mensa 
et al. (2014), supra note 28. The focus of the 2020 Staff Study was 
determined by the directive of Congress in its Joint Explanatory 
Statement accompanying the Financial Services and General Government 
Appropriations Act, which directed the staff to study the recent 
growth of negative net equity issuances with respect to non-
financial issuers, including the history and effects of those 
issuers repurchasing their own securities, and the effects of those 
repurchases on investment, corporate leverage, and economic growth. 
The study provided data and statistics on share repurchases across 
different types of companies and time periods, as well as an 
extensive discussion of related evidence in existing research, which 
offers insight into the existing market baseline. For example, the 
study discusses the evidence on the favorable market reaction to 
repurchase announcements. Among its findings, the study notes that 
``[r]epurchases are an increasingly common way firms distribute cash 
to shareholders. There are several possible reasons firms conduct 
repurchases; some support efficient investment and for some the 
connection is less clear. The analysis below suggests that firms are 
more likely to conduct repurchases when they have excess cash and 
when they would benefit from increased reliance on debt financing.'' 
The study further notes that ``the data is consistent with firms 
using repurchases to maintain optimal levels of cash holdings and to 
minimize their cost of capital'' and that ``reasons for repurchases 
where the connection to efficient investment is less clear are 
unlikely to motivate the majority of repurchases since stock prices 
typically increase in response to repurchase announcements, 
suggesting that, at least on average, repurchases are viewed as 
having a positive effect on firm value . . . [and] that the theories 
inconsistent with firm value maximization cannot account for the 
majority of repurchase activity.'' In discussing one of the 
criticisms of share repurchases, the study notes ``that insider 
sales may be timed to coincide with repurchase announcements. If 
insiders time sales to coincide with repurchase announcements and 
any resulting increase in stock price, executives may be 
incentivized to recommend repurchase programs to further their own 
gain.'' However, the study notes, it is ``difficult to ascertain the 
motivations underlying insider sales.'' See also infra note 390 and 
accompanying text.

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[[Page 36031]]

amounted to approximately $950 billion.\384\ Aggregate repurchases have 
grown significantly over the past four decades, but the increase 
relative to aggregate market capitalization has been significantly more 
modest due to the accompanying growth in aggregate market 
capitalization; in addition, aggregate repurchases, both in absolute 
terms and relative to aggregate market capitalization, have exhibited 
considerable cyclical fluctuations (increasing during economic booms 
and declining during recessions).\385\ As noted by a commenter, the 
growth in repurchases was considerably smaller when adjusted for equity 
issuance than when considered in gross terms.\386\ Dividends fluctuate 
less than repurchases, consistent with dividends being viewed by the 
market as a commitment to regularly return cash to shareholders.\387\ 
As a result, managers may endeavor to keep dividend payments stable, 
mainly avoiding dividend cuts, justifying the market's 
interpretation.\388\ Firms that exclusively pay dividends are 
increasingly rare whereas the proportion of firms that regularly 
conduct repurchases has increased over time, consistent with 
repurchases being a partial substitute for dividends.\389\ As a caveat, 
existing studies referenced in this release, including the 2020 Staff 
Study, are necessarily constrained by existing disclosure 
limitations.\390\
---------------------------------------------------------------------------

    \384\ Based on staff analysis of Standard & Poor's Compustat 
Fundamentals Annual data (version retrieved June 27, 2022) related 
to share repurchases conducted during fiscal years ending between 
January 1, 2021 and December 31, 2021 by issuers listed on U.S. 
exchanges (including financial industry issuers and U.S.-listed 
issuers incorporated outside the U.S.). This estimate includes 
financial industry issuers as well as U.S.-listed foreign-
incorporated issuers with Compustat data. As of this writing, we 
lack complete data for fiscal years ending during January 1-December 
31, 2022.
    \385\ See, e.g., Campello, M., Graham, J., & Harvey, C., The 
Real Effects of Financial Constraints: Evidence from a Financial 
Crisis, 97 J. Fin. Econ. 470 (2010); Dittmar, A. & Dittmar, R., The 
Timing of Financing Decisions: An Examination of the Correlation in 
Financing Waves, 90 J. Fin. Econ. 59 (2008) (``Dittmar and Dittmar 
(2008)''); Floyd, E., Li, N., & Skinner, D., Payout Policy through 
the Financial Crisis: The Growth of Repurchases and the Resilience 
of Dividends, 118 J. Fin. Econ. 299 (2015). See also 2020 Staff 
Study (observing that growth in aggregate repurchases has fluctuated 
over the past several decades, as demonstrated by a large decline 
and rebound following the financial crisis, and also observing that 
share repurchases net of equity issuances as a percentage of 
aggregate market capitalization of public companies have remained 
relatively stable over the past decade, within the longer trend of 
modest percentage growth over the last forty years). See also letter 
from Chamber V (discussing cyclicality and seasonality of 
repurchases).
    \386\ See letters from Chamber II and Profs. Lewis and White. 
The commenter cites findings by Fried: Fried, J.M., & Wang, C.C. Are 
Buybacks Really Shortchanging Investment? Harv. Bus. Rev., 88-95, 
https://hbr.org/2018/03/are-buybacks-really-shortchanging-investment 
(2018, March-April); Fried, J. https://hbr.org/2018/03/are-buybacks-really-shortchanging-investment; Fried, J.M., & Wang, C.C. Short-
Termism and Capital Flows, 8 Rev. Corp. Fin. Stud. 207 (2019); and 
Fried, J.M., & Wang, C.C. Short-Termism, Shareholder Payouts and 
Investment in the EU, 27 Eur. Fin. Mgmt. 389 (2021). As the 
commenter also notes, Asness, Hazelkorn, and Richardson (2018) 
``present empirical evidence that repurchases do not mechanically 
grow earnings or reduce investment.'' See Asness, C., Hazelkorn, T., 
& Richardson, S. Buyback Derangement Syndrome, 44 J. Portfolio Mgmt. 
50 (2018). As the commenter further notes, ``Edmans (2017, 2020) 
also argues that issuers do not systematically misuse cash for 
repurchases.'' See Edmans, A. (2017, September 15). The Case for 
Stock Buybacks, Harv. Bus. Rev.; and Edmans, A. (2020). Grow the 
Pie: How Great Companies Deliver Both Purpose and Profit. Cambridge 
University Press.
    \387\ See, e.g., Brealey, R., Myers, S., & Allen, F., Principles 
of Corporate Finance (12th ed. 2017). Issuers generally announce 
dividend policies, and markets react strongly to increases and 
reductions in dividends. See, e.g., Healy, P. & Palepu, K., Earnings 
Information Conveyed by Dividend Initiations and Omissions, 21 J. 
Fin. Econ. 149 (1988). Market reactions to initiations and omissions 
are even more pronounced. See Michaely, R., Thaler, R., & Womack, 
K., Price Reactions to Dividend Initiations and Omissions: 
Overreaction or Drift? 50 J. Fin. 573 (1995); Lee, B.S. & Mauck, N., 
Dividend Initiations, Increases and Idiosyncratic Volatility, 40 J. 
Corp. Fin. 47 (2016). These studies indicate that decreases in 
buybacks do not elicit the same negative market reaction as dividend 
decreases.
    \388\ For example, one survey of 384 chief financial officers 
(``CFOs'') and executives suggests that the ability to avoid 
reducing dividends was the top consideration of managers when 
determining dividend policy. See Brav, A., Graham, J., Harvey, C., & 
Michaely, R., Payout Policy in the 21st Century, 77 J. Fin. Econ. 
483 (2005) (``Brav et al. (2005)'').
    \389\ See 2020 Staff Study. The partial substitution between 
dividends and repurchases has also been documented in academic 
studies. See, e.g., Skinner, D., The Evolving Relation between 
Earnings, Dividends and Stock Repurchases, 87 J. Fin. Econ. 582 
(2008); Grullon, G. & Michaely, R., Dividends, Share Repurchases, 
and the Substitution Hypothesis, 57 J. Fin. 1649 (2002).
    \390\ The low frequency and the unstructured nature of existing 
Item 703 data on repurchase activity limit the ability of existing 
studies to gauge the extent of information asymmetry between issuers 
and investors associated with the execution of repurchase programs 
and its economic effects. Existing disclosure has also limited the 
ability of existing studies to draw a causal connection between 
managerial incentives and day-to-day execution of repurchase 
programs as well as quantify its economic effects. Further, while 
public attention has focused on the aggregate trends in repurchases, 
the attribution of aggregate trends to specific drivers of 
repurchases is complicated due to the presence of confounding 
factors that cannot be readily isolated in existing data. The 
discussed data limitations should be considered in evaluating 
existing studies of the motivations of repurchases. Additional 
caveats, where applicable, are referenced in the discussion of 
individual strands of research and evidence on repurchases below.
---------------------------------------------------------------------------

    A recent change that followed the issuance of the Proposing Release 
and that is likely to affect share repurchases is the enactment of the 
one percent excise tax on share repurchases of covered corporations 
under the Inflation Reduction Act, which took effect January 1, 
2023.\391\ To the extent that the new excise tax causes some issuers to 
reduce the frequency and/or size of their repurchases or choose to 
declare a dividend instead, the number of issuers subject to the 
amendments will decrease. Among issuers that continue to engage in 
share repurchases after the effectiveness of the new excise tax, and 
that therefore remain subject to the amendments, some may decrease the 
level of share repurchases.\392\ Compared to the use of gross share 
repurchases, the application of the excise tax to repurchases net of 
equity issuance, which is clarified in recently issued Treasury 
guidance,\393\ is likely to narrow the scope of the potential excise 
tax effect.\394\ However, it is difficult to forecast how many filers 
that engaged in repurchases in the past will cease or reduce 
repurchases after the effectiveness of the excise tax due to several 
limitations, including confounding macroeconomic and regulatory 
factors, a lack of a directly comparable prior regulatory intervention, 
uncertainty about how companies will weigh investors' personal tax 
preferences against the corporate excise tax on repurchases, and the 
fact that other company-specific factors, besides the excise tax on 
buybacks, affect payout decisions.\395\
---------------------------------------------------------------------------

    \391\ See Public Law 117-169, 136 Stat. 1818 (2022). See also 
Notice 2023-2 Initial Guidance Regarding the Application of the 
Excise Tax on Repurchases of Corporate Stock under Section 4501 of 
the Internal Revenue Code, available at https://www.irs.gov/pub/irs-drop/n-23-02.pdf (``Excise Tax Guidance'').
    \392\ See Staff Excise Tax Memorandum, at 5.
    \393\ See Excise Tax Guidance.
    \394\ See Staff Excise Tax Memorandum, at p. 3 and note 11. See 
also 2020 Staff Study.
    \395\ See Staff Excise Tax Memorandum, at 4, 8. See also letter 
from Chamber V (stating that the effects of the excise tax will 
likely be unknown for at least a year after it becomes effective due 
to the seasonality in stock repurchases and issuances, and also 
noting the possibility of a global recession in 2023 that may affect 
the quantification of the impact of the excise tax on repurchases 
due to the cyclicality of share repurchases and issuances, 
concluding that ``a period of at least two years is necessary to 
properly gather data and quantify the impact of the excise tax on 
share repurchase activity.'').
---------------------------------------------------------------------------

    As stated in Section I above, we have considered the potential 
effects of the excise tax and the additional comments received. While 
postponing the analysis of the amendments for one or two years 
following the effectiveness of the Inflation Reduction Act would 
provide additional repurchase data for the post-excise tax period, we 
do not believe that such data is likely to yield meaningful changes to 
the analysis of the economic effects of the amendments for two reasons. 
First, to the extent that the

[[Page 36032]]

excise tax results in a decline in repurchase activity, both in terms 
of the number of repurchasing issuers and the level of repurchases by 
the issuers that continue to repurchase, those effects of a potential 
change in the market baseline on the economic analysis of the proposed 
amendments have been considered above and in the Staff Memorandum. We 
do not believe that a decline in repurchase activity due to the excise 
tax, should one occur, will have an effect on this economic analysis 
that is meaningfully different from a decline in repurchase activity 
for other reasons, such as a change in market conditions. Generally, 
any significant trends of issuers discontinuing their repurchase 
programs as a result of the excise tax will result in a decrease in the 
aggregate costs of the rule. We document the evolution of share 
repurchases, including the cyclicality in share repurchases, in the 
2020 Staff Study. Furthermore, whether the aggregate level of share 
repurchases decreases or remains largely unaffected, we continue to 
believe that the underlying rationale for the rule--informing investors 
in a more comprehensive fashion about the repurchase decisions of 
issuers that do continue to conduct repurchases--remains applicable. 
Moreover, when corporate repurchase decisions carry a new potential 
cost to shareholder value, in the form of an excise tax, informing 
shareholders about the reasoning behind, the structure of, and the 
incremental nature of, an issuer's repurchase decisions may be even 
more important.
    Second, more importantly, due to the significant problem of 
aggregate confounding factors, obtaining even two additional years of 
data after the effectiveness of the excise tax is unlikely to enable us 
to identify the incremental contribution of the excise tax. Changes in 
macroeconomic and regulatory factors could confound the interpretation 
of any change in the level of repurchase activity. For example, it is 
virtually impossible to disentangle the role of other aggregate factors 
that would have a similar direction of the effect on the level of 
repurchase activity, such as the changes in macroeconomic conditions 
and monetary policy, from the effects of widespread application of a 
new tax on corporate repurchases. For example, a deterioration in 
macroeconomic conditions may also lead issuers to conserve cash and 
reduce or eliminate share repurchases (the much more flexible form of 
shareholder payouts, compared to cash dividends). As another example, 
contemporaneous increases in interest rates could make debt relatively 
less attractive, leading to a reduction in debt-financed equity 
repurchases that would be unrelated to the excise tax change. While the 
effects of the excise tax are not expected to change the direction and 
the qualitative nature of the economic effects of the amendments 
discussed in Sections V.B. and V.C. with respect to any particular 
share repurchase that takes place, to the extent that there is a 
reduction in the total number of issuers that undertake share 
repurchases due to the excise tax, the aggregate economic effects of 
the amendments will decrease.\396\ In addition, for issuers that 
continue repurchases but decrease their level and thus remain subject 
to the amendments, we expect the portion of costs and benefits that 
scales with the level of repurchases to decrease.\397\
---------------------------------------------------------------------------

    \396\ See Staff Excise Tax Memorandum, at 9-12.
    \397\ See Staff Excise Tax Memorandum, at 9-12.
---------------------------------------------------------------------------

    Information about past repurchases is valuable to investors. 
Several empirical studies show that on average share prices increase 
after share repurchases.\398\ However, some studies do not find this 
result.\399\ The differences in the conclusions may be due to 
differences in empirical methodology and sample period.\400\ Because 
these studies utilize presently available monthly data, they may suffer 
from a lack of statistical power. Studies focused on share repurchase 
announcements also find positive returns.\401\ Researchers have 
identified several channels through which a repurchase could increase 
the share price. One of the earliest strands of research on share 
repurchases concludes that issuer share repurchases are related to the 
undervaluation of its securities.\402\ Corporate insiders likely have a 
superior understanding of their business and industry. Academic 
research suggests that managers can use increases in distributions, 
such as new repurchase programs, to signal their view that the stock is 
undervalued and is expected to increase in the future.\403\ Issuers may 
also undertake repurchases in an effort to provide price support by 
supplying liquidity when selling pressure is high; thus, share prices 
would be lower during an issuer's repurchases and higher 
afterwards.\404\ Thus, more comprehensive and disaggregated, granular 
information

[[Page 36033]]

about recent repurchases and prices of such repurchases should be 
useful to investors in inferring the management's evolving beliefs 
about the company's underlying value and, in conjunction with other 
disclosures, improving price discovery.
---------------------------------------------------------------------------

    \398\ See, e.g., Dittmar, A. & Field, L.C., Can Managers Time 
the Market? Evidence Using Repurchase Price Data, 115 J. Fin. Econ. 
261 (2015) (``Dittmar and Field (2015)''); Ben-Rephael, A., Oded, 
J., & Wohl, A., Do Firms Buy Their Stock at Bargain Prices? Evidence 
From Actual Stock Repurchase Disclosures, 18 Rev. Fin. 1299 (2014) 
(``Ben-Rephael et al. (2014)''); Chan, K., Ikenberry, D., & Lee, I., 
Do Managers Time the Market? Evidence from Open-Market Share 
Repurchases, 31 J. Banking & Fin. 2673 (2007) (``Chan et al. 
(2007)''); Cook, D., Krigman, L., & Leach, J.C., On the Timing and 
Execution of Open Market Repurchases, 17 Rev. Fin. Stud. 463 (2004) 
(``Cook et al. (2004)'') (finding that larger firms in the sample 
perform better than smaller firms in timing the price at which 
repurchases are executed); Bargeron, L. & Bonaim[eacute], A.A., Why 
Do Firms Disagree with Short Sellers? Managerial Myopia versus 
Private Information, 55 J. Fin. & Quantitative Analysis 2431 (2020) 
(``Bargeron and Bonaim[eacute] (2020)'') (concluding that managers 
of firms facing short selling pressure increase repurchases as a 
result of managers' private information advantage over short 
sellers). Horizons and methodologies employed in these studies 
differ. For example, Dittmar and Field (2015) find that infrequent 
repurchasers experience positive price trends for one, three, and 
six months after months of actual repurchases (but the result is not 
observed for frequent repurchasers); Ben-Rephael et al. (2014) find 
a positive one-month drift following the disclosure of actual 
repurchases; and Chan et al. (2007) show positive abnormal returns 
after repurchase program announcements over up to a four-year 
horizon.
    \399\ See, e.g., Obernberger, S., The Timing of Actual Share 
Repurchases, Working paper (2014) (concluding that contrarian 
trading rather than market timing ability explains the observed 
relation between returns and actual share repurchases); Dittmar and 
Dittmar (2008); Bonaim[eacute], A.A., Hankins, K., & Jordan, B., The 
Cost of Financial Flexibility: Evidence From Share Repurchases, 38 
J. Corp. Fin. 345 (2016) (``Bonaim[eacute] et al. (2016)'') (finding 
that ``actual repurchase investments underperform hypothetical 
investments that mechanically smooth repurchase dollars through time 
by approximately two percentage points per year on average'').
    \400\ As a general caveat, any working papers cited here have 
generally not undergone peer review and may be subject to revision.
    \401\ See, e.g., Evgeniou, T., Junqu[eacute] de Fortuny, E., 
Nassuphis, N., & Vermaelen, T., Volatility and the Buyback Anomaly, 
49 J. Corp. Fin. 32 (2018); Bargeron, L., Kulchania, M., & Thomas, 
S., The Timing and Source of Long-Run Returns Following Repurchases, 
52 J. Fin. & Quantitative Analysis 491 (2017); Peyer, U., & 
Vermaelen, T., The Nature And Persistence of Buyback Anomalies, 22 
Rev. Fin. Stud. 1693 (2009). But see Fu, F. & Huang, S., The 
Persistence of Long-Run Abnormal Returns Following Stock Repurchases 
and Offerings, 62 Mgmt. Sci. 964 (2016) (documenting disappearance 
of long-run, post-repurchase abnormal returns during 2003-2012).
    \402\ See the survey of the literature on share repurchases in 
Farre-Mensa et al. (2014).
    \403\ For analysis of signaling with repurchases, see, e.g., 
Vermaelen, T., Common Stock Repurchases and Market Signaling: An 
Empirical Study, 9 J. Fin. Econ. 139 (1981); Vermaelen, T., 
Repurchase Tender Offers, Signaling, and Managerial Incentives, 19 
J. Fin. & Quantitative Analysis 163 (1984); Constantinides, G. & 
Grundy, B., Optimal Investment with Stock Repurchase and Financing 
as Signals, 2 Rev. Fin. Stud. 445 (1989); Hausch, D. & Seward, J., 
Signaling with Dividends and Share Repurchases: A Choice Between 
Deterministic and Stochastic Cash Disbursement, 6 Rev. Fin. Stud. 
121 (1993); McNally, W., Open Market Stock Repurchase Signaling, 28 
Fin. Mgmt. 55 (1999). In some studies, authors find that repurchases 
send a stronger signal than dividends. See, e.g., Ofer, A. & Thakor, 
A., A Theory of Stock Price Responses to Alternative Corporate Cash 
Disbursement Methods: Stock Repurchases and Dividends, 42 J. Fin. 
365 (1987); Persons, J., Heterogeneous Shareholders and Signaling 
with Share Repurchases, 3 J. Corp. Fin. 221 (1997).
    \404\ See, e.g., Liu, H. & Swanson, E., Is Price Support a 
Motive for Increasing Share Repurchases?, 38 J. Corp. Fin. 77 (2016) 
(``Liu and Swanson (2016)'').
---------------------------------------------------------------------------

    Comprehensive disclosure of recent actual repurchases should thus 
contain valuable information about the issuer's beliefs about the 
fundamental valuation of the company that is not revealed to the market 
otherwise. Conversely, a lack of comprehensive disclosure contributes 
to information asymmetries between investors and issuers. The 
additional quantitative and qualitative disclosures we are adopting are 
further expected to enhance the information about share repurchases, 
providing clearer insights into how and why the issuers undertake 
repurchases and the extent to which they are related to temporary 
undervaluation of issuer shares, temporary cash windfalls that cannot 
be deployed to positive-net present value (NPV) investment projects, or 
other objectives. The benefit of the information contained in 
disclosures of recent repurchase activity is expected to be lower to 
the extent that large issuer repurchases already have a price impact, 
resulting in price discovery and indirect revelation of information to 
the market, even in the absence of additional disclosure.\405\ 
Nevertheless, to the extent that an issuer's repurchases incorporate 
insiders' future outlook on the firm, they could be informative to 
investors (complementing the information in Form 4 filings).
---------------------------------------------------------------------------

    \405\ See also letters from Chamber II and Profs. Lewis and 
White (noting that ``the information contained in order flow may 
subsume much of the information that would be contained in more 
frequent disclosure'').
---------------------------------------------------------------------------

    The existing disclosure of share repurchases aggregated on a 
monthly basis does not allow investors to evaluate the specific timing 
of actual repurchases or repurchase patterns or changes in conjunction 
with other public information and point-in-time disclosures made by the 
issuer and, if applicable, its executives.
    Various studies address motivations behind corporate payouts and 
the choice of the form of payout (repurchases or dividends).\406\ As 
demonstrated by prior research, in a number of instances, the use of 
repurchases can be efficient and aligned with shareholder value 
maximization and benefit investors.\407\ Sometimes issuers that have 
excess cash do not have profitable investment opportunities.\408\ In 
such instances, distributing the cash through dividends or repurchases 
can alleviate concerns that managers will spend the cash in sub-optimal 
ways, such as empire-building acquisitions.\409\ Survey evidence 
supports this theory, with the second most cited reason for conducting 
a repurchase being the ``lack of good investment opportunities.'' \410\ 
By returning excess cash to shareholders, repurchases free up the 
capital that can then be invested in other businesses that lack the 
capital to pursue value-creating investment opportunities. Stock price 
reactions to announcements of new repurchase programs are higher for 
cash-rich issuers, which may be consistent with the creation of value 
when managers remove their discretion over how to invest excess cash 
and provide that cash to investors to redeploy as they see fit.\411\
---------------------------------------------------------------------------

    \406\ For a more detailed summary of the related studies, see 
2020 Staff Study and Farre-Mensa et al. (2014).
    \407\ See 2020 Staff Study. See also letters from Chamber II and 
Profs. Lewis and White; Lewis, C. M. The Economics of Share 
Repurchase Programs (Feb. 2019), available at https://amac.us/wp-content/uploads/2019/02/The-Economics-of-Share-Repurchase-Programs1.pdf.
    \408\ See, e.g., 2020 Staff Study stating that ``most 
repurchases are conducted by companies with excess cash relative to 
investment opportunities,'' as pointed out by a commenter. See 
letters from Chamber II and Profs. Lewis and White.
    \409\ See Jensen, M., Agency Costs of Free Cash Flow, Corporate 
Finance, and Takeovers, 76 Am. Econ. Rev. 323 (1986).
    \410\ See Brav et al. (2005).
    \411\ See Grullon, G. & Michaely, R., The Information Content of 
Share Repurchase Programs, 59 J. Fin. 651-680 (2004).
---------------------------------------------------------------------------

    Additionally, issuers may choose repurchases if the excess free 
cash flow stems from a one-time windfall, or if they value financial 
flexibility and wish to avoid a costly, long-term commitment to higher 
dividends.\412\ For instance, firms that favor repurchases tend to have 
more volatile cash flows than dividend-paying firms.\413\ Issuers with 
excess free cash flow may also choose repurchases over dividends as the 
method of payout because repurchases are more tax-efficient for 
shareholders.\414\ Finally, repurchases may also be used to adjust an 
issuer's leverage upward, as part of adjustment towards the target 
capital structure, or as part of a market timing approach to capital 
structure.\415\
---------------------------------------------------------------------------

    \412\ See, e.g., Guay, W. & Harford, J., The Cash-Flow 
Permanence and Information Content of Dividend Increases versus 
Repurchases, 57 J. Fin. Econ. 385 (2000); Jagannathan, M., Stephens, 
C., & Weisbach, M., Financial Flexibility and the Choice between 
Dividends and Stock Repurchases, 57 J. Fin. Econ. 355 (2000). See 
also supra notes 387-388 and accompanying text.
    \413\ See Hoberg, G. & Prabhala, N., Disappearing Dividends, 
Catering, and Risk, 22 Rev. Fin. Stud. 79 (2009) (showing that 
riskier firms are less likely to pay dividends).
    \414\ See, e.g., Feng, L., Pukthuanthong, K., Thiengtham, D., 
Turtle, H.J., & Walker, T.J., The Effects of Cash, Debt, and 
Insiders on Open Market Share Repurchases, 25 J. Applied Corp. Fin. 
55 (2013). The tax advantage of repurchases has been attenuated but 
not eliminated after the 2003 dividend tax cut. Outside of tax-
exempt/tax-deferred accounts, all shareholders are subject to taxes 
on dividends for the year the dividend was paid. In the case of 
repurchases, only selling shareholders are subject to taxes on 
capital gains (the remaining shareholders do not pay taxes until 
they sell their shares). See, e.g., Chetty, R. & Saez, E. Dividend 
Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax 
Cut, 120 Q. J. Econ. 791 (2005); Chetty, R. & Saez, E. The Effects 
of the 2003 Dividend Tax Cut on Corporate Behavior: Interpreting the 
Evidence, 96 Am. Econ. Rev. 124 (2006); Aboody, A. & Kasznik, R. 
Executive Stock-Based Compensation and Firms' Cash Payout: The Role 
of Shareholders' Tax-Related Payout Preferences, 13 Rev. Acct. Stud. 
216 (2008); Blouin, J., Raedy, J., & Shackelford, D., Dividends, 
Share Repurchases, and Tax Clienteles: Evidence from the 2003 
Reductions in Shareholder Taxes, 86 Acct. Rev. 887 (2011). Studies 
have found companies with investors less averse to dividends due to 
tax reasons are more likely to pay dividends, and vice versa. See, 
e.g., Desai, M. & Jin, L. Institutional Tax Clienteles and Payout 
Policy, 100 J. Fin. Econ. 68 (2011). See also letter from Davis 
Polk.
    \415\ See, generally, Baker, M. & Wurgler, J., Market Timing and 
Capital Structure, 57 J. Fin. 1 (2002). Some other evidence suggests 
that firms tend to repurchase stock and issue debt when the cost of 
debt falls relative to the cost of equity. See Ma, Y., Nonfinancial 
Firms as Cross[hyphen]Market Arbitrageurs, 74 J. Fin. 3041 (2019) 
(``Ma (2019)''). See also Hovakimian, A., Role of Target Leverage in 
Security Issues and Repurchases, 77 J. Bus. 1041 (2004) (finding 
that ``equity issues and repurchases do not offset the accumulated 
deviation from the target and they are timed to market 
conditions'').
---------------------------------------------------------------------------

    Some commentators and studies have noted that opportunistic insider 
behavior and agency conflicts, rather than firm value maximization, can 
motivate repurchases. In particular, repurchases can serve as a form of 
real earnings management (through decreasing the denominator of EPS) 
and thus be subject to short-term earnings management objectives of an 
executive seeking to meet or beat consensus forecasts.\416\ CFO survey 
responses indicate that increasing EPS is an important factor affecting 
share

[[Page 36034]]

repurchase decisions.\417\ Investors may take this into account when 
evaluating EPS.\418\ Nevertheless, earnings management-motivated 
repurchases can have negative real effects on the issuer and its 
shareholders, such as forgoing valuable investments.\419\ Some sources 
disagree.\420\ Announcements of repurchases and actual repurchase 
trades can also result in short-term upward price pressure.\421\ Share 
price- or EPS-tied compensation arrangements can thus incentivize 
executives to undertake repurchases, in an attempt to maximize their 
compensation, even if such repurchases are not optimal from the 
shareholder value maximization perspective. A number of studies have 
examined the use of repurchases to influence compensation tied to per-
share measures.\422\ Further, a different study examined the real cost 
of EPS-motivated repurchases outside the context of compensation.\423\ 
However, a different study documented a link between EPS targets and 
repurchases but did not find evidence of negative effects on 
shareholders.\424\ As an important caveat, the discussed incentives 
would be weaker to the extent executive compensation plans and board 
committees that address executive compensation account for how 
repurchases would affect compensation targets and the value of 
incentive-based compensation.\425\

[[Page 36035]]

Another instance of potentially inefficient repurchase behavior that 
some studies have shown could have a negative effect on investors 
involves insider incentives to raise the share price prior to insider 
sales.\426\ Other studies reach different conclusions.\427\ As a 
caveat, some studies note that in cases where repurchase announcements 
coincide with earnings announcements, insider sales activity after the 
repurchase announcement may be the result of pent-up liquidity demand 
because issuers generally prohibit insiders from trading in the period 
leading up to earnings announcements as part of blackout periods.\428\ 
Further, in cases of findings related to trends in insider sales around 
repurchase announcements, such trends may not directly translate to 
patterns of insider sales around actual repurchases. As a final caveat, 
omitted variables may affect both insider sales and repurchases.\429\ 
Conversely, some studies note that insider purchases of stock in 
conjunction with a repurchase announcement may strengthen the 
credibility of the repurchase signal.\430\ CFOs report that they 
consider the price of the stock when deciding whether to repurchase 
stock.\431\ Further, academic studies have found that firms conduct 
repurchases when stock prices are low.\432\ The effects of such issuer 
trading on liquidity are not fully certain, with several studies 
finding improved liquidity during repurchase programs,\433\ and several 
other studies pointing to adverse selection effects of trading by the 
better informed issuer.\434\
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    \416\ For evidence on the use of repurchases as a method of real 
earnings management, see, e.g., Bens, D., Nagar, V., Skinner, D., & 
Wong, M.H.F. Employee Stock Options, EPS Dilution, and Stock 
Repurchases, 36 J. Acct. & Econ. 51 (2003) (finding that stock 
repurchases increase when ``(1) the dilutive effect of outstanding 
employee stock options (ESOs) on diluted EPS increases, and (2) 
earnings are below the level required to achieve the desired rate of 
EPS growth'' and concluding that executives' repurchase decisions 
are ``driven by incentives to manage diluted but not basic EPS, and 
strengthening our earnings management interpretation''); 
Bonaim[eacute], A.A., Kahle, K., & Moore, D., Employee Compensation 
Still Impacts Payout Policy, Working Paper (2020) (finding ``a 
strong positive relation between the dilutive effect of stock-based 
employee compensation and share repurchases''); Burnett, B., Cripe, 
B., Martin, G., & McAllister, B., Audit Quality and the Trade-Off 
Between Accretive Stock Repurchases and Accrual-Based Earnings 
Management, 87 Acct. Rev. 1861 (2012).
    \417\ See Brav et al. (2005).
    \418\ For example, Hribar et al. (2006), supra note 33, finds 
that the market discounts EPS announcements in situations in which 
EPS would have been shy of analyst expectations but for share 
repurchases (and where repurchases are disclosed along with 
quarterly earnings); Kahle, K. When a Buyback isn't a Buyback: Open 
Market Repurchases and Employee Options, 63 J. Fin. Econ. 235 (2002) 
(noting that the market appears to recognize the anti-dilutive 
motive for repurchases and reacts less positively to repurchases 
announced by firms with high levels of nonmanagerial options). Kurt 
(2018) studies the use of ASRs for real earnings management and 
concludes investors ``are not fooled'' by managers' use of ASRs as 
an earnings management device. However, Kurt (2018) notes that 
``[u]pward revision observed in analysts' EPS forecasts upon the 
announcement of ASRs is short-lived, indirectly facilitating firms' 
use of ASRs to meet or beat consensus forecasts.'' See Kurt, A., 
Managing EPS and Signaling Undervaluation as a Motivation for 
Repurchases: The Case of Accelerated Share Repurchases, 17 Rev. 
Acct. Fin. 453 (2018). But see Edmans et al. (2022).
    \419\ For example, one recent study finds that repurchases used 
to push EPS above analyst expectations are accompanied by a 10% 
decrease in capital expenditures and a 3% decrease in research and 
development. See, e.g., Almeida et al. (2016), supra note 33. Note 
that the Almeida et al. (2016) findings do not necessarily 
generalize to repurchases by issuers outside the range of EPS 
approaching the earnings target, or to repurchases unrelated to EPS 
manipulation. The Almeida et al. (2016) study further finds that, 
amongst the subset of issuers that are close to missing the EPS 
forecast, ``[i]t is clear that EPS-induced repurchases are on 
average not detrimental to shareholder value or subsequent 
performance,'' as pointed out by a commenter. See letters from 
Chamber II and Profs. Lewis and White. However, the Almeida et al. 
(2016) study also notes that ``some firms sacrifice valuable 
investments to finance share repurchases.'' A 2016 McKinsey & Co. 
report states that share repurchases do not improve shareholder 
returns simply by increasing EPS because, under certain conditions, 
there may have been more preferable uses for those funds such as 
debt reduction and reinvestment in the firm. See Ezekoye, O., 
Koller, T., & Mittal, A., How Share Repurchases Boost Earnings 
without Improving Returns, McKinsey (Apr. 29, 2016), available at 
https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-share-repurchases-boost-earnings-without-improving-returns.
    \420\ See PwC (2019) Share Repurchases, Executive Pay and 
Investment, BEIS Research Paper No. 2019/011 (``PwC Report'') 
(finding in UK data ``no relationship between share repurchases and 
investment'' and also finding that, even when focused ``on firms 
that would have just missed an EPS target in the absence of a 
repurchase, and thus are particularly likely to cut investment to 
finance a repurchase . . . [that] these firms did not cut investment 
more than other firms that would have just met an EPS target in the 
absence of a repurchase.''); Kay, I. & Martin, B. Are Share Buybacks 
a Symptom of Managerial Short-Termism? New Insights on Executive 
Pay, Share Buybacks, and Other Corporate Investments, PayGovernance 
(2019) (finding that ``four-year post-buyback performance on TSR and 
CapEx growth was higher for the companies in the large buyback 
sample than for the companies with smaller buybacks'', ``that 
companies with higher short-term TSR had equal or higher subsequent 
long-term TSR and CapEx growth'', and also suggesting that both 
companies with small and large buybacks ``appear to be optimizing 
earnings growth'').
    \421\ With respect to actual share repurchases, a recent study 
shows that price support provided by actual share repurchases 
improves price efficiency, even when manipulation concerns might be 
highest, such as those that occur prior to insider sales. See Busch, 
B. & Obernberger, S., Actual Share Repurchases, Price Efficiency, 
and The Information Content Of Stock Prices, 30 Rev. Fin. Stud. 324 
(2017) (``Busch and Obernberger (2017)''). With respect to share 
repurchase announcements, some have suggested that managers may take 
advantage of positive stock price reactions to non-binding 
repurchase announcements and use disingenuous repurchase 
announcements to manipulate share prices. See Chan et al. (2010) 
(finding in 1980-2000 data, which predates the 2003 Item 703 
amendments, that a limited number of managers may have used 
repurchases in a misleading way as ``cheap talk'', noting as a 
caveat that ``the total number of buybacks where managers may have 
been intending to mislead investors, while nonzero, also appears to 
be limited''). Such ``cheap talk'' may result in lower announcement 
returns. See, e.g., Bonaim[eacute], A.A., Repurchases, Reputation, 
and Returns, 47 J. Fin. & Quantitative Analysis 469 (2012) 
(``Bonaim[eacute] (2012)''); Bonaim[eacute] (2015). In contrast, 
other studies argue that ``cheap-talk'' repurchase announcements may 
correct mispricing by attracting additional market scrutiny. See 
Almazan, A., Banerji, S., & De Motta, A., Attracting Attention: 
Cheap Managerial Talk and Costly Market Monitoring, 63 J. Fin. 1399 
(2008); Bhattacharya, U. & Jacobsen, S., The Share Repurchase 
Announcement Puzzle: Theory and Evidence, 20 Rev. Fin. 725 (2016). 
Further, as pointed out by some commenters, the 2020 Staff Study 
concludes that ``[r]epurchase announcements are accompanied by stock 
price increases. This announcement effect does not dissipate over 
time, as one would expect if repurchases were based on efforts to 
manipulate share prices.'' See letters from Chamber II and Profs. 
Lewis and White.
    \422\ See, e.g., Cheng, Y., Harford, J., & Zhang, T., Bonus-
Driven Repurchases, 50 J. Fin. & Quantitative Analysis 447 (2015) 
(``Cheng et al. (2015)'') (finding that ``when a CEO's bonus is 
directly tied to earnings per share (EPS), his company is more 
likely to conduct a buyback,'' with the effect being ``especially 
pronounced when a company's EPS is right below the threshold for a 
bonus award,'' that ``[s]hare repurchasing increases the probability 
the CEO receives a bonus and the magnitude of that bonus, but only 
when bonus pay is EPS based,'' and further finding that ``[b]onus-
driven repurchasing firms do not exhibit positive long-run abnormal 
returns''); Kim, S. & Ng, J., Executive Bonus Contract 
Characteristics and Share Repurchases, 93 Acct. Rev. 289 (2018) 
(finding that ``managers are more (less) likely to repurchase shares 
and spend more (less) on repurchases when as-if EPS just misses 
(exceeds) the bonus threshold (maximum) EPS level,'' and that 
``[m]anagers making bonus-motivated repurchases do so at a higher 
cost''); Marquardt, C., Tan, C., & Young, S. (2011) Accelerated 
Share Repurchases, Bonus Compensation, and CEO Horizons, Working 
paper (finding that firms are more likely to choose ASRs over open 
market repurchases ``when the repurchase is accretive to EPS, when 
annual bonus compensation is explicitly tied to EPS performance, 
when CEO horizons are short, and when CEOs are more entrenched''). 
See also letter from S. Kaswell (supporting benefits of additional 
disclosure about whether repurchase plans trigger additional 
executive compensation).
    \423\ See Almeida et al. (2016) (finding that ``[t]he 
probability of share repurchases that increase earnings per share 
(EPS) is sharply higher for firms that would have just missed the 
EPS forecast in the absence of the repurchase, when compared with 
firms that `just beat' the EPS forecast'' and that ``EPS-motivated 
repurchases are associated with reductions in employment and 
investment, and a decrease in cash holdings'' and concluding that 
``managers are willing to trade off investments and employment for 
stock repurchases that allow them to meet analyst EPS forecasts''). 
See also Rulemaking Petition 4-746.
    \424\ See Young, S. & Yang, J., Stock Repurchases and Executive 
Compensation Contract Design: The Role of Earnings Per Share 
Performance Conditions, 86 Acct. Rev. 703-733 (2011) (finding ``a 
strong positive association between repurchases and EPS-contingent 
compensation arrangements'' but also finding ``net benefits to 
shareholders from this association'' (including ``larger increases 
in total payouts'', a more pronounced ``positive association between 
repurchases and cash performance'' in the presence of surplus cash; 
greater likelihood of undervalued firms ``signal[ing] mispricing 
through a repurchase,'' and ``lower abnormal accruals'') and ``no 
evidence that EPS-driven repurchases impose costs on share-holders 
in the form of investment myopia'').
    \425\ See 2020 Staff Study (finding that, based on a review of 
compensation disclosures in proxy statements for a sample of 50 
firms that repurchased the most stock in 2018 and 2019,''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'' and concluding that ``[m]ost of the money 
spent on repurchases over the past two years was at companies that 
either do not link managerial compensation to EPS-based performance 
targets or whose boards considered the impact of repurchases when 
determining whether EPS-based performance targets were met or in 
setting the targets, suggesting that other rationales motivated the 
repurchases''), which was noted by several commenters. See, e.g., 
letters from Bishop, Cato, Chamber II, Coalition, Profs. Lewis and 
White, T. Rowe Price, Virtu, and Vistra. The 2020 Staff Study also 
notes that ``[collectively], these findings potentially suggest that 
most repurchase activity does not represent an effort to 
artificially inflate stock prices or influence the value of option-
based or EPS-linked compensation'', as noted by a commenter (see 
letters from Chamber II and Profs. Lewis and White). See also, e.g., 
Fields, R., Buybacks and the Board: Director Perspectives on the 
Share Repurchase Revolution, Sept. 20, 2016, available at https://corpgov.law.harvard.edu/2016/09/20/buybacks-and-the-board-director-perspectives-on-the-share-repurchase-revolution/ (concluding, based 
on interviews of ``44 directors serving on the boards of 95 publicly 
traded U.S. companies with an aggregate market capitalization of 
$2.7 trillion'' that ``most directors said that their companies are 
aware of the relationship between buyback programs and compensation 
and that they make deliberate, informed choices to ensure that they 
reward executives for desired behavior rather than for financial 
manipulation of share prices. Anticipated buyback effects on EPS are 
usually factored into EPS targets, they say, and unanticipated 
effects can be adjusted out.''); PwC Report (finding in the UK 
setting, which has daily reporting, ``no significant relationship 
between share repurchases and either the existence of an EPS 
condition or the proportion of an incentive award linked to that 
condition within executive pay incentives and share repurchases,'' 
and finding in UK survey data that ``30% of companies adjust their 
EPS targets contained within LTIPs for share repurchase activity, 
and most senior executives acknowledge share repurchases should be 
reviewed by remuneration committees.''); Bargeron, L., Kulchania, 
M., & Thomas, S. Accelerated Share Repurchases, 101 J. Fin. Econ. 69 
(2011) (finding limited evidence of earnings management motives for 
ASRs in the presence of proxies for the value of flexibility); 
Bennett, B., Bettis, C., Gopalan, R., & Milbourn, T. Compensation 
Goals and Firm Performance, 124 J. Fin. Econ. 307 (2017) (in Table 
5, not finding evidence that firms that just exceed the compensation 
EPS goal undertake more repurchases than firms that just miss the 
EPS goal, inconsistent with strategic use of repurchases to manage 
EPS targets in compensation contracts). See also letters from 
Chamber II; Vistra; Maryland Bar; Virtu; T. Rowe Price; Pay 
Governance; SCG; Coalition; Cato; PA Chamber; Bishop; and Profs. 
Lewis and White.
    \426\ See, e.g., letters from AFREF et al., Better Markets I, 
CFA Institute, CII, Oxfam, Prof. Palladino, and Public Citizen. See 
also, e.g., Chan et al. (2010). See also Bonaim[eacute], A.A. & 
Ryngaert, M.D., Insider Trading and Share Repurchases: Do Insiders 
and Firms Trade in the Same Direction?, 22 J. Corp. Fin. 35-53 
(2013) (``Bonaim[eacute] and Ryngaert (2013)'') (finding that 
repurchases that coincide with net insider selling may be related to 
price support and/or reasons related to option exercises); Cziraki 
et al. (2021), supra note 34, (finding that ``[h]igher insider net 
buying is associated with better post-event operating performance, a 
reduction in undervaluation, and, for repurchases, lower post-event 
cost of capital. Insider trading also predicts announcement returns 
and long-term abnormal returns following events.'' They conclude 
their results suggest ``insider trades before corporate events 
[repurchases and SEOs] contain information about changes both in 
fundamentals and in investor sentiment''); Palladino (2020) (finding 
increased insider selling in quarters where buybacks are occurring); 
Ahmed, W., Insider Trading Around Open Market Share Repurchase 
Announcements, Working paper, University of Warwick (2017) (finding 
that ``insiders take advantage of higher post-[repurchase] 
announcement price and sell more heavily'', and that such selling is 
predictive of lower long-term returns). See also Rulemaking Petition 
4-746, at 5 and note 17 (expressing concern and citing evidence of 
repurchases used to increase share prices at the time when insiders 
sell shares) and letter from Prof. Jackson, Dr. Hu, and Dr. Zytnick. 
See also, generally, Edmans et al. (2018), supra note 35 (finding 
that ``CEOs release 20% more discretionary news items in months in 
which they are expected to sell equity, predicted using scheduled 
vesting months'' and that ``[t]he increase arises for positive news, 
but not neutral or negative news, nor nondiscretionary news'' and 
concluding that ``[n]ews in vesting months generates a temporary 
increase in stock prices and market liquidity, which the CEO 
exploits by cashing out shortly afterwards''; as an important 
caveat, while the study includes buybacks among announcements, and 
based on other evidence, they are generally viewed as positive 
announcements, the study does not provide specific results for 
buybacks); Edmans et al. (2022), supra note 34 (finding that 
``[v]esting equity is positively associated with the probability of 
a firm repurchasing shares'' but that ``it is also associated with 
more negative long-term returns over two to three years following 
repurchases'' and that ``CEOs sell their own stock shortly after 
using company money to buy the firm's stock, also inconsistent with 
repurchases being motivated by undervaluation'').
    \427\ See, e.g., Liu and Swanson (2016) (finding that 
``[c]orporate insiders do not sell from personal stock holdings 
during the price support quarter.''); see also Busch and Obernberger 
(2017) (concluding with respect to actual share repurchases, that 
price support provided by repurchases improves price efficiency, 
even when manipulation concerns might be highest, such as those that 
occur prior to insider sales).
    \428\ See Dittmann et al. (2022), supra note 40 (finding that 
``both the timing of buyback programs and the timing of equity 
compensation, i.e., the granting, vesting, and selling of equity, 
are largely determined by the corporate calendar through blackout 
periods and earnings announcement dates,'' ``not support[ing] the 
conclusion that CEOs systematically misuse share repurchases at the 
expense of shareholders,'' and concluding that ``equity compensation 
increases the propensity to launch a buyback program when buying 
back shares is beneficial for long-term shareholder value.''); and 
Profs. Lewis and White (finding that the rise in insider selling 
after repurchase announcements is driven by outliers and issuer 
blackout periods) and letter from Chamber II. As a caveat, we note 
that the commenters and the Dittmann et al. (2022) study do not 
appear to have ruled out the possibility that repurchase and vesting 
calendars are not aligned coincidentally.
    \429\ As noted in Edmans et al. (2022), an analysis of insider 
sales around repurchases may be susceptible to endogeneity concerns 
due to omitted variable bias (e.g., if poor investment opportunities 
cause the CEO to divest shares and also make it optimal for the firm 
to pay out surplus free cash flow).
    \430\ Announcement returns are positively related to past 
insider purchases, especially for firms that are priced less 
efficiently. See, e.g., Dittmar & Field (2015) (finding that 
``repurchasing firms with relatively high net insider buying have 
significantly lower relative repurchase prices'' and concluding that 
firms with more net insider buying repurchase undervalued stock); 
Babenko, I., Tserlukevich, Y., & Vedrashko, A., The Credibility of 
Open Market Share Repurchase Signaling, 47 J. Fin. & Quantitative 
Analysis 1059 (2012) (``Babenko and Vedrashko (2012)''); 
Bonaim[eacute] and Ryngaert (2013) (finding that net insider buying 
reinforces the undervaluation signal conveyed by repurchases while 
net insider selling weakens it); Cziraki et al. (2021), supra note 
34, (showing that ``pre-event insider trading contains information 
regarding future changes in the cost of capital for repurchasing 
firms''). Setting aside the signaling theory, purchases by insiders 
during an issuer's repurchases if such insiders are in possession of 
material nonpublic information may represent unlawful insider 
trading that may harm other market participants. Similar to 
insiders, issuers that purchase their securities while in possession 
of material nonpublic information may be subject to Rule 10b-5 
liability.
    \431\ Brav et al. (2005).
    \432\ See, e.g., Dittmar and Field (2015); Ben-Rephael et al. 
(2014); Chan et al. (2007); Cook et al. (2004).
    \433\ See, e.g., Busch and Obernberger (2017); Cook et al. 
(2004); Hillert, A., Maug, E., & Obernberger, S., Stock Repurchases 
and Liquidity, 119 J. Fin. Econ. 186 (2016). See also letters from 
Chamber II and Profs. Lewis and White; Lewis, C.M., & White, J.T. 
(2021). Corporate Liquidity Provision and Share Repurchase Programs, 
U.S. Chamber of Commerce: Center for Capital Markets Competitiveness 
(Fall 2021), available at https://www.centerforcapitalmarkets.com/wp-content/uploads/2021/09/CCMC_Stock-Buybacks_WhitePaper_10.2.21.pdf. See also letter from Chamber II.
    \434\ See, e.g., Barclay, M.J., & Smith, C.W. Corporate Payout 
Policy: Cash Dividends versus Open Market Repurchases, 22 J. Fin. 
Econ. 61 (1988); Ginglinger, E., & Hamon, J., Actual Share 
Repurchases, Timing and Liquidity, 31 J. Banking & Fin. 915 (2007) 
(using data from France); Brockman, P., & Chung, D.Y. Managerial 
Timing and Corporate Liquidity: Evidence from Actual Share 
Repurchases, 61 J. Fin. Econ. 417 (2001) (using data from Hong 
Kong).
---------------------------------------------------------------------------

    Presently, information about repurchases, aggregated at the monthly

[[Page 36036]]

level, is provided in periodic reports (on a quarterly basis for 
domestic issuers that report on Forms 10-Q and 10-K, on a semi-annual 
basis for Listed Closed-End Funds that report on Form N-CSR, and on an 
annual basis for FPIs that report on Form 20-F).\435\ Issuers are not 
required to provide more disaggregated information than the monthly 
aggregates to investors about repurchases. This lack of disaggregated 
disclosure about past repurchases likely contributes to information 
asymmetries and thus makes it harder for investors to evaluate an 
issuer's share repurchase program, determine the correct valuation of 
an issuer's securities, and as a result make informed investment 
decisions.
---------------------------------------------------------------------------

    \435\ In addition to the disclosures on Form N-CSR that provide 
more 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. See supra 
footnote 7.
---------------------------------------------------------------------------

    Although issuers, particularly exchange-listed issuers, may often 
announce details of their repurchase programs on a voluntary basis, 
issuers are not currently required to do so, or to disclose the 
structure or objectives and rationales for their repurchase program. In 
particular, to our knowledge, most issuers subject to the final 
amendments do not currently disclose daily share repurchase 
information. Further, issuers are not required to disclose whether they 
allow insiders to trade during repurchases. Thus, it can sometimes be 
difficult for investors to determine whether the undertaken repurchases 
were efficient and aligned with shareholder value maximization, or were 
driven at least in part by factors other than shareholder interests.
    The last significant change to repurchase reporting was adopted in 
2003,\436\ when the Commission required issuers to present monthly data 
on actual repurchases on a quarterly basis in Form 10-Q or 10-K for 
domestic corporate issuers, semi-annual basis in Form N-CSR for Listed 
Closed-End Funds, and on an annual basis in Form 20-F for FPIs. One 
study examined the consequences of this change and found that ``[f]irms 
announce significantly fewer and slightly smaller open market 
repurchase plans in the enhanced disclosure environment,'' however, 
``completion rates (the amount of stock repurchased as a percentage of 
the announced amount) significantly increase.'' \437\ The study further 
states that ``[m]ore conservative announcement strategies and more 
aggressive completion rates are consistent with a decline in false 
signaling . . . open market repurchase announcements are viewed as more 
credible, on average, in the enhanced disclosure environment.'' \438\ 
However, as the study notes, ``[a]s with any analysis based on a 
regulatory change affecting all firms simultaneously, other 
unobservable, macroeconomic trends could have affected repurchase 
behavior.'' \439\
---------------------------------------------------------------------------

    \436\ See 2003 Adopting Release, supra note 5.
    \437\ See Bonaim[eacute] (2015).
    \438\ Id.
    \439\ Id.
---------------------------------------------------------------------------

    Available data on issuer use of Rule 10b5-1 plans under the 
baseline was discussed in Section V.A.1 above.
    In Sections V.B. and V.C. below we evaluate the anticipated costs 
and benefits of the final rule and the anticipated effects of the final 
rule on efficiency, competition, and capital formation.

B. Benefits

    We begin the discussion with the general benefits applicable to all 
of the final amendments, continue to discuss the benefits specific to 
the new quantitative repurchase disclosure, and then proceed to the 
benefits specific to other amendments.
1. General Benefits of the Disclosures
    We anticipate the amendments will give rise to benefits by 
strengthening investor protection, improving market efficiency, and 
facilitating capital formation. The amended disclosure requirements are 
expected to benefit investors (including existing shareholders 
contemplating a sale of securities or a purchase of additional 
securities) by providing investors with more comprehensive and 
comparable disclosures about share repurchases and thus enabling them 
to value the issuer's securities more accurately, resulting in better 
informed investment decisions.\440\ Existing evidence in academic 
research (discussed in detail in Section V.A.2. above) and various 
comment letters on the proposal \441\ support the presence of 
significant information asymmetries between insiders and other 
investors on undertaken repurchases and the extent to which they may 
relate to the fundamental value of the issuer's stock. The issuer's 
evolving knowledge of the issuer's future prospects, and thus, share 
valuation may be reflected in the execution of actual share repurchases 
following a repurchase program announcement. Thus, more comprehensive 
disclosure of the issuer's repurchase strategy may indirectly inform 
investors about the issuer's fundamental value, in addition to other 
existing disclosures (unrelated to issuer repurchases). Moreover, to 
the extent that reasons for actual repurchases may be confounded by 
managerial self-interest, additional information on the timing of 
repurchases can be indicative of such agency problems, informing 
investors about the likely impacts of repurchases on shareholder 
value.\442\ Hence, we disagree with some commenters' \443\ suggestion 
that there is no market failure necessitating additional repurchase 
disclosures. Continuing the existing regime where issuers are only 
mandated to provide abbreviated and aggregated disclosure of share 
repurchases, as compared to the final amendments, and relying solely on 
voluntary disclosure of additional repurchase plan details to fill 
these information gaps is not a solution to the information asymmetry 
issues because of market failures arising from collective action and 
moral hazard problems.
---------------------------------------------------------------------------

    \440\ See supra notes 403-404, 402-404, 432 and accompanying 
text.
    \441\ See supra notes 65, 146, 247, and 264.
    \442\ See supra notes 416-426 and accompanying and following 
text.
    \443\ See, e.g., letters from Chamber II and Profs. Lewis and 
White for a detailed discussion of this argument.
---------------------------------------------------------------------------

    Specifically, there are potential collective action problems that 
preclude an optimal level of additional voluntary disclosure. 
Voluntarily disclosing the additional details of their share repurchase 
strategy when other issuers do not do so can place the issuer at a 
relative disadvantage. For example, such disclosures can be costly to 
individual firms due to the costs of compiling the disclosures, the 
potential legal risk stemming from such disclosures, and the potential 
costs of leaking valuable private information to competitors that may 
infer proprietary information about the issuer. In addition, such 
disclosures may reveal information to other traders that may trade 
against the issuer, resulting in a less favorable repurchase price, 
particularly for multi-quarter repurchase programs. While more 
comprehensive repurchase disclosure is privately costly to individual 
issuers in such a voluntary framework, such disclosure has positive 
informational externalities for investors and other market participants 
which are not internalized by each issuer, which may lead issuers to 
rationally under-disclose relative to what is optimal from the 
investors' perspective.\444\
---------------------------------------------------------------------------

    \444\ As an alternative to the voluntary repurchase strategy 
disclosure, to address the information asymmetries, insiders could 
publicly reveal their private information about the stock's 
fundamental value. However, an individual issuer doing so could 
reveal private information on the firm's strategy to their 
competitors, also giving rise to a collective action problem--thus, 
a voluntary regime results in too little disclosure.

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[[Page 36037]]

    Under the final amendments, all issuers would be required to follow 
the same standard framework to disclose repurchase information at the 
level of detail that facilitates investor evaluation of repurchase 
information and helps them make comparisons among all issuers, thus 
enabling better informed investment decisions. The final amendments 
would therefore address the aforementioned market failure resulting 
from collective action problems.
    Furthermore, to the extent that managerial self-interest may affect 
some repurchase decisions, moral hazard problems may also contribute to 
this market failure by undermining the optimal provision of voluntary 
disclosure about share repurchases to investors. In order for voluntary 
disclosure to result in the complete revelation of all relevant private 
information, there would need to be no agency problems (i.e., no 
conflicts of interest between managers and shareholders) such that 
managers' sole objective with respect to repurchase disclosures would 
be to optimally disclose to shareholders information about repurchases. 
However, if managers have other objectives and incentives that 
interfere with the decision to make fulsome repurchase disclosures on a 
voluntary basis, reliance on the additional disclosures being made 
voluntarily may not result in the same complete information. For 
example, if some repurchases are not made to maximize shareholder value 
due to agency problems, managers may not wish to provide detailed 
disclosure. Moreover, when agency problems exist, investors can no 
longer be sure if the absence of additional, voluntarily provided 
disclosure reflects good or bad news for the firm, given that some 
managers may have self-serving incentives. To the extent that there are 
instances where some repurchase decisions benefit the management rather 
than maximize shareholder value, they would give rise to agency 
conflicts with respect to providing sufficient disclosure about 
repurchases.
    More comprehensive and standardized disclosure about recent 
repurchase activity is therefore expected to alleviate information 
asymmetries about an issuer's repurchase strategy and therefore be 
beneficial to investors (as discussed in detail in Section V.B. below). 
Further, the final amendments will ensure greater uniformity across 
issuers in the provision of qualitative and quantitative information 
about repurchases to investors, facilitating investor comparison and 
analysis of information across issuers and time periods. We thus 
believe that the decrease in information asymmetry as a result of the 
amended disclosure requirements would benefit investors, facilitating 
better informed investment decisions. Some commenters have expressed 
concern that the disclosure mandated by the amendments will undermine 
benefits to investors by eliminating information acquisition 
incentives.\445\ However, the disclosure will not eliminate all 
information asymmetries for several reasons: (i) the final amendments 
include a delay in the timing of the disclosure of the issuer's 
repurchase trades; (ii) the final amendments require the revelation of 
significant aspects of the repurchase program rather than require the 
issuers to reveal the entirety of its private information; and (iii) 
investors have disclosure processing costs and differ in their learning 
from, and analysis of, public disclosures.\446\
---------------------------------------------------------------------------

    \445\ See letters from Chamber II and Profs. Lewis and White, 
referring to the argument, motivated by Grossman and Stiglitz 
(1980), that ``[w]ithout some level of asymmetric information, there 
would be fewer incentives to invest in information collection, 
resulting in less price discovery and a corresponding reduction in 
liquidity.'' See Grossman, S.J., & Stiglitz, J.E. (1980). On the 
Impossibility of Informationally Efficient Markets, 70 Am. Econ. 
Rev. 393.
    \446\ See Blankespoor, E., deHaan, E. and Marinovic, I. (2020) 
Disclosure Processing Costs, Investors' Information Choice, and 
Equity Market Outcomes: A Review, 70 J. Acct. & Econ. 101344 
(discussing the investor costs of ``monitoring for, acquiring, and 
analyzing [public] firm disclosures,'' which they collectively 
characterize as ``disclosure processing costs,'' and noting that 
``[t]he existence of processing costs means that learning from 
disclosures is an active economic choice, much like learning from 
any private information source. Rational investors expect a 
competitive return to processing and, thus, disclosure pricing 
cannot be perfectly efficient'' and that ``[t]here is extensive 
evidence that disclosure processing costs affect all types of 
investors, from the smallest to most sophisticated, and can affect 
stock returns and other market outcomes within rational 
equilibria.'').
---------------------------------------------------------------------------

    Relative to the baseline of existing disclosure requirements, the 
final amendments will require more comprehensive and detailed 
disclosure about issuer repurchase programs (including their structure 
and objectives, policies related to insider trading around repurchases, 
and information about issuer repurchase plans under Rule 10b5-1) and 
actual repurchases undertaken by issuers, enabling more insight into 
issuers' repurchase decisions and how they impact shareholder value.
    The benefits of the amended disclosure requirements may vary across 
investors. The described benefits may be more limited for some 
sophisticated investors to the extent that those investors can gauge 
partial information from the existing disclosures and public 
announcements of repurchase programs, and to the extent that some large 
repurchases have price impact, indirectly from existing market data. 
However, information that is available today is generally much less 
extensive and much less standardized across issuers than is required 
under the final amendments. Further, investors may differ in their 
ability to efficiently process and interpret the additional 
disclosures. For example, some commenters indicated that the benefit of 
granular day-by-day information about repurchases for informing trading 
strategies may be greatest for more sophisticated traders.\447\ 
However, overall, we believe the amendments will result in 
significantly more standardized, comparable, accessible, and generally 
more comprehensive disclosure about repurchases, for all repurchasing 
issuers subject to the amendments, which is expected to benefit all 
investors, including less sophisticated investors.
---------------------------------------------------------------------------

    \447\ See infra note 452.
---------------------------------------------------------------------------

2. Additional Quantitative Repurchase Disclosure
    The more detailed disclosure of actual repurchases at the daily 
level will provide additional information to inform investment 
decisions compared to repurchase information aggregated to the monthly 
level that is required to be disclosed today (and voluntary 
announcements of repurchase programs issuers make today). More granular 
data on daily repurchase activity levels and repurchase prices, 
relative to existing disclosures, can provide more insight to investors 
about the issuer's share repurchase strategy, including the timing of 
execution of share repurchase decisions, the evolving outlook on the 
valuation of its shares (as revealed by issuer trading), as well as how 
recent repurchase decisions relate to other value-relevant corporate 
decisions. Investors are expected to derive additional information 
benefits from combining the amended repurchase disclosures with 
existing financial and other disclosures in periodic reports, earnings 
guidance and earnings announcements, proxy statements, etc. In 
addition, for FPIs that presently are subject to repurchase disclosure 
requirements in annual reports on Form 20-F, the amended disclosure 
requirements will ensure significantly timelier disclosure of 
repurchase information, making it available to investors on a quarterly 
basis.

[[Page 36038]]

    Over the last several decades, repurchases have become a partial 
substitute for dividends as a means of returning cash to 
investors.\448\ Unlike dividends which are smoothed and therefore 
highly predictable, repurchases are less so. Overall, the additional 
disclosure under the amended requirements will enable investors to 
better understand the issuer's share repurchase decisions and how they 
relate to shareholder value maximization, what the company's repurchase 
strategy is (including the use of Rules 10b-18 and 10b5-1), how the 
repurchase strategy varies with market conditions, as applicable, and 
whether the repurchase is based on the need to gradually return cash, 
potential temporary mispricing, or other factors. This will allow 
investors, particularly, shareholders that sell shares during issuer 
repurchases, to evaluate a more consistent and standardized disclosure 
across various issuers, relative to the baseline. Furthermore, any 
decrease in the information asymmetry between issuers and investors and 
among investors due to the final amendments should contribute to a 
reduction in adverse selection costs, which may promote liquidity.
---------------------------------------------------------------------------

    \448\ See supra note 389.
---------------------------------------------------------------------------

    In addition, repurchase activity data disaggregated on a day-by-day 
basis, combined with other existing disclosures and public information 
(e.g., dates and details of earnings announcements, analyst forecasts, 
earnings guidance, acquisition announcements, compensation awards, 
insider trades etc.), may enable investors to evaluate more accurately 
whether some recent repurchases coincided with events that may give 
rise to repurchase incentives other than undervaluation of shares or 
distribution of excess free cash flow (e.g., meeting/beating the 
consensus earnings forecast ahead of the earnings announcements, 
increasing the share price prior to an insider's sale, meeting a 
threshold in the compensation arrangement etc.). To the extent that the 
amended disclosure requirements refine the ability of investors to 
gauge the likely impacts of share repurchases on shareholder value 
maximization, they are expected to result in better informed investment 
decisions. Further, the amended disclosure is expected to provide 
investors with additional context (with a greater level of granularity 
than the existing disclosure presently reported on an aggregated, 
month-by-month basis) for interpreting past repurchase announcements, 
which may help investors in evaluating future repurchase announcements 
by the issuer. Finally, one potential indirect effect of the amendments 
may be to disincentivize repurchases that are not conducive to 
shareholder value maximization, to the extent they are present at a 
given firm, by drawing investor attention to such instances, benefiting 
shareholders.
    Some commenters on the daily reporting proposal have suggested that 
repurchase data at the daily level may be noisy \449\ (in the sense 
that daily fluctuations in repurchases may have various causes other 
than new information about the firm's valuation) \450\ and also lead 
some investors to draw inaccurate inferences.\451\ These considerations 
are in our view unlikely to limit the information benefits of the 
disclosure, particularly in the presence of sophisticated investor 
bases. Further, the change from the proposal will allow investors to 
analyze daily repurchase data within the context of the repurchase 
disclosures for the entire quarter and the accompanying qualitative 
disclosures, filtering out noise better, rather than trade in response 
to each daily report, potentially alleviating some of the commenter 
concerns about noise and volatility.
---------------------------------------------------------------------------

    \449\ See supra notes 79-81.
    \450\ See also Core, J.E. A Review of the Empirical Disclosure 
Literature: Discussion, 31 J. Acct. & Econ. 441 (2001) (noting the 
finding in Bushee and Noe (2001) that ``increases in `transient' 
institutional investors (institutions that trade aggressively) are 
associated with increases in stock price volatility'' and stating 
that ``[a]ssuming that increases in stock price volatility are 
costly, this finding is consistent with the intuition that partial 
disclosure is optimal, and that too much disclosure can be as costly 
as too little disclosure.'')
    \451\ See supra notes 79-80, 84-85, and 92. But see, e.g., 
letter from Roosevelt (disagreeing with the idea that daily data 
would lead to too much noise).
---------------------------------------------------------------------------

    While some commenters have noted the concern that the daily 
granularity of repurchase information may represent data that is too 
disaggregated for retail investors to easily parse and benefit 
from,\452\ we disagree that this information will widen information 
asymmetries among investors. By making more detailed information 
accessible to all investors which was not accessible in any way before, 
we expect the final amendments to provide more information to retail 
investors rather than less. Thus retail investors are expected to 
incrementally benefit from the final amendments.
---------------------------------------------------------------------------

    \452\ See supra notes 86-87. But see supra note 65 (discussing 
comment letters supporting the information benefits of higher-
frequency reporting for investors, including individual investors) 
and see also, generally, Easley, D., & O'Hara, M. Information and 
the Cost of Capital 59 J. Fin. 1553 (2004) (``Easley and O'Hara 
(2004)'') (showing, in a theoretical framework, a positive role for 
public information because it reduces the risk for uninformed 
traders of holding the asset). Moreover, in equilibrium, the ability 
of sophisticated investors to capitalize on their superior 
information processing technology strengthens their incentive to 
compete for information and contributes to greater informational 
efficiency of prices. Furthermore, many of the sophisticated 
institutional investors may be involved in delegated portfolio 
management, advising or managing portfolios for the benefit of less 
sophisticated clients.
---------------------------------------------------------------------------

    Consistent with the existing repurchase disclosure requirement, the 
new disclosure of historical daily repurchase activity will be required 
to be filed rather than furnished. Having the information be filed, 
rather than furnished, ensures consistency in the liability standard 
applicable to the additional repurchase disclosures provided under 
amended Item 703 and the disclosures required to be provided under Item 
703 today.\453\
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    \453\ See supra note 7.
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3. Additional Qualitative Repurchase Disclosures
a. Objectives and Rationales and Repurchase Program Structure 
Disclosures
    Further, amended Item 703 \454\ will require periodic disclosure of 
the objectives and rationales, as well as the structure, of the 
issuer's repurchase program. This disclosure is expected to improve the 
ability of investors to assess the shareholder value implications of 
the issuer's repurchase policy.\455\ Such information benefits are not 
limited to instances where share repurchases are not aligned with 
shareholder value maximization. In particular, as discussed in Section 
V.A.1 above and noted by a commenter,\456\ there are various scenarios 
where share repurchases are aligned with shareholder value maximization 
(for example, repurchasing undervalued securities, signaling future 
issuer prospects, distributing excess free cash flow, or adjusting 
capital structure). Disclosure of the objectives and rationales of 
share repurchases that enhance shareholder value is also expected to 
inform investor decisions and potentially provide investors with a more 
comprehensive picture of the repurchasing issuer's circumstances and 
future outlook. We continue to recognize the fact that the benefits of 
the

[[Page 36039]]

information about the rationales, and the structure of, repurchase 
programs could be limited in cases where issuers already voluntarily 
provide similar information in repurchase program announcements or 
periodic reports, or if some investors are able to infer the purpose or 
structure of repurchases from other public information.\457\ The 
benefits of the information about the rationales for repurchases may 
also be limited if such disclosures provide relatively little 
specificity to investors.\458\ However, as discussed above, the final 
amendments will require more standardized and comparable disclosure of 
the rationales for all issuers subject to the amendments, giving all 
investors equal access to this information and thus facilitating all 
investors' ability to process this information more effectively.
---------------------------------------------------------------------------

    \454\ See supra note 7.
    \455\ See supra notes 146-148 and 247 and accompanying text 
(discussing comment letters that supported the information benefits 
of the amended Item 703 disclosures of the objective and rationale 
of the repurchase program and the use of Rules 10b5-1 and 10b-18 to 
conduct the repurchase program).
    \456\ See, e.g., letter from Chamber II for a detailed 
discussion.
    \457\ See letter from Chamber II. See also, e.g., Bonaim[eacute] 
(2012) (tabulating, in Table 3, evidence on the stated motive of the 
announced repurchase program and program completion rates). The 
paper finds that ``[f]ew stated motives for repurchases affect 
completion rates. Firms that mention undervaluation or general 
corporate purposes in their announcements have significantly lower 
completion rates, while firms that mention extending a prior plan or 
having a strong cash position have significantly higher completion 
rates on average. With the above exceptions, completion rates depend 
more on what issuers are doing (implied motives) than on what they 
are saying (stated motives).'' As a caveat, data obtained from a 
voluntary regime may not fully generalize to the mandatory 
disclosure of the rationale for repurchases under the amendments. 
See also, e.g., letters from Cravath, Dow, and Maryland Bar, which 
indicate that investors are unlikely to benefit from the disclosure 
of whether repurchases were structured under Rule 10b5-1(c)(1) or 
Rule 10b-18.
    \458\ See also supra note 250 and accompanying text (discussing 
comment letters that stated that the objective and rationale 
disclosure would result in boilerplate disclosure that will not 
prove meaningful to investors).
---------------------------------------------------------------------------

    In some cases, incentives for repurchases may not be aligned with 
shareholder value maximization, as discussed in Section V.A.2 above. 
The inclusion of the disclosure of the objectives and rationales for 
share repurchases may aid investors in assessing whether recent 
repurchases were consistent with shareholder value maximization, 
potentially resulting in better informed investment decisions.
b. Issuer Rule 10b5-1 Repurchase Plans
    The new disclosure requirements under Item 408(d) (discussed in 
Section III.D.3 above) will benefit investors in companies that 
undertake share repurchases under Rule 10b5-1 by providing greater 
transparency about such trading arrangements.\459\ This enhanced 
transparency should enable better informed investment decisions and 
more efficient allocation of investor capital. The timing of issuer 
trading arrangement adoptions and terminations, as well as a 
description of the material terms of the trading arrangements, is 
expected to provide additional insight into the issuer's repurchase 
strategy and the implementation of the previously announced repurchase 
plans, potentially aiding investors in making more informed investment 
decisions. These informational benefits may be lower in cases in which 
investors already can obtain sufficient insight into the issuer 
repurchase program from existing repurchase disclosures.
---------------------------------------------------------------------------

    \459\ See supra note 339.
---------------------------------------------------------------------------

    Informational benefits of the Item 408(d) disclosure may also be 
lower in cases of trades that are not driven by temporary 
undervaluation of issuers' shares but, for instance, involve gradual 
disbursement of excess cash flow or rebalancing of capital structure 
towards a target leverage ratio. Finally, similar to the recently 
adopted Item 408(a) related to officer and director trading 
arrangements, in a change from the proposal, price terms of issuer Rule 
10b5-1 plans will be outside the scope of the new Item 408(d) 
disclosure. This change will reduce the informational benefits to 
investors, compared to the proposed amendments.
c. Insider Trading Checkbox and Policies and Procedures Disclosures
    The final amendments require disclosure of: (i) 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 (ii) whether any section 16 
reporting officer or director of an issuer that files on domestic 
forms--or senior management or directors of an FPI--purchased or sold 
shares or other units of the class of the issuer's securities that are 
the subject of an issuer share repurchase plan or program within four 
business days before or after the issuer's repurchase announcement. 
These requirements may also benefit investors by enabling better 
informed investment decisions.\460\ This information may help investors 
better interpret repurchase program announcements and disclosures of 
actual repurchase activity in formulating projections of an issuer's 
future share price. As one example, a lack of restrictions on insider 
selling during repurchases, alongside historical disclosures of insider 
selling, may help investors gauge whether a repurchase announcement, or 
actual repurchases, may be inefficient, for example, potentially 
motivated by boosting the share price prior to insiders' sales of their 
securities, rather than conveying a true signal of undervaluation or 
efficiently disbursing excess cash.\461\ As another example, such a 
disclosure may also prompt investors to check whether insiders bought 
shares within a few days before the share repurchase announcement. In a 
change from the proposal, after considering commenter concerns about 
the utility of the disclosure, we are limiting the checkbox disclosure 
to insider trading within four business days, rather than ten business 
days, before and after the repurchase announcement. By focusing the 
disclosure on a narrower time frame more specific to the repurchase 
announcement, this is expected to improve the informativeness of the 
disclosure to investors.
---------------------------------------------------------------------------

    \460\ See supra note 264 and accompanying text.
    \461\ See supra note 426.
---------------------------------------------------------------------------

    As an indirect effect of the amendments, if the additional 
disclosures draw investor scrutiny to insider selling during 
repurchases, to the extent it occurs at some companies,\462\ the 
amendments also may disincentivize repurchase announcements and actual 
repurchases motivated by boosting share prices in advance of insider 
selling, to the extent such activity exists, instead of shareholder 
value maximization, or lead issuers to adopt policies prohibiting such 
insider selling.\463\ The benefits of the disclosure of whether any 
officer or director has purchased or sold securities of the issuer 
around the repurchase announcement are likely to be small for many 
issuers that file on domestic forms \464\ to the extent the investors 
can obtain the same information from existing Exchange Act section 16 
disclosures and public announcements of repurchases.\465\ Nevertheless, 
the checkbox disclosure should present this information to investors in 
an incrementally more accessible way, resulting in a small decrease in 
the costs of accessing this information for those investors that do not 
already collate beneficial ownership filings. Further, for

[[Page 36040]]

investors in FPIs whose officers and directors are not subject to 
section 16, the disclosure will provide new information that investors 
may utilize in conjunction with the qualitative and quantitative 
repurchase disclosures.
---------------------------------------------------------------------------

    \462\ See supra note 426 and accompanying text.
    \463\ Studies have found evidence that changes in mandatory 
disclosure affect behavior. See, e.g., Chuk, E.C., Economic 
Consequences of Mandated Accounting Disclosures: Evidence from 
Pension Accounting Standards, 88 Acct. Rev. 395 (2013); 
Bonaim[eacute] (2015).
    \464\ Officers and directors of FPIs are not subject to section 
16 reporting obligations and would therefore incur higher costs.
    \465\ See supra note 272 (discussing comment letters that 
supported the benefits of requiring the checkbox disclosure). But 
see supra notes 276-282 (discussing comment letters that indicate 
that this disclosure is unnecessary).
---------------------------------------------------------------------------

4. Inline XBRL
    The use of a structured data language (specifically, Inline XBRL) 
for the repurchase disclosures under the final amendments will enable 
automated extraction of data on issuers' repurchase programs and actual 
repurchases, which will allow investors, information intermediaries, 
and other market participants to efficiently perform large-scale 
analyses and comparisons of repurchases across issuers and time 
periods, in line with the suggestions of various commenters that it 
would improve the usability of the data.\466\ Structured data on 
repurchases could also be efficiently combined with other information 
available in a structured data language in corporate filings (e.g., 
financial statement information in periodic reports, as well as 
information on insider sales and purchases of securities) and with 
market data contained in external machine-readable databases (e.g., 
information on daily share prices and trading volume). The use of a 
structured data language will also enable considerably faster analysis 
of the disclosed data by investors and other market participants. In 
that regard, we expect the particular investors most likely to use the 
structured disclosures for their analysis are institutional investors 
with the sophistication to process structured data; retail investors 
will be more likely to benefit indirectly from the use of structured 
disclosure by other parties.\467\
---------------------------------------------------------------------------

    \466\ See supra note 360.
    \467\ See supra note 452. But see Birt, J.L. Muthusamy, K. & 
Bir, P., XBRL and the Qualitative Characteristics of Useful 
Financial Information, 30 J. Acct. Res. 107 (2017) (finding 
``financial information presented with XBRL tagging is significantly 
more relevant, understandable and comparable to non-professional 
investors''). Evidence indicates XBRL tagging has improved analyst 
coverage and, in some cases, forecast accuracy. See, e.g., Liu, C., 
Wang, T., & Yao, L.J., XBRL's impact on analyst forecast behavior: 
An empirical study. J. Acct. Pub. Pol., 33 (2014). Retail investors 
have been observed to rely heavily on analyst interpretation of 
financial information. See, e.g., Lawrence, A., Ryans, J.P., & Sun, 
E.Y., Investor Demand for Sell-Side Research, 92 Acct. Rev. 2 
(2017).
---------------------------------------------------------------------------

    As with the repurchase disclosures, the Inline XBRL structuring 
requirements for the insider trading disclosures should augment their 
benefits by improving their usability. The magnitude of these benefits 
is likely to be modest to the extent that past insider selling activity 
around past repurchases, disclosed on beneficial ownership filings, 
could be sufficiently representative of future insider selling behavior 
in such circumstances, even in the absence of a disclosure of 
restrictions. The magnitude of these benefits of reduced information 
asymmetry may further be limited to the extent that the existing 
repurchase and disclosure practices are already sufficient for price 
efficiency.\468\
---------------------------------------------------------------------------

    \468\ For example, one recent study shows that price support 
provided by actual share repurchases contributes to improved price 
efficiency, even when manipulation concerns might be highest, such 
as those that occur prior to insider sales. See Busch and 
Obernberger (2017). See also letter from Chamber II (stating that 
managers strategically use share repurchases during periods of 
uncertainty and that ``these effects help mitigate risks, allow 
institutional and retail investors alike to buy and sell shares 
without having a large price impact, and stabilize trading markets. 
Thus, repurchases help to reduce volatility, which presents a 
benefit to all shareholders, including retail investors, regardless 
of whether investors buy and sell shares in their own accounts or 
participate indirectly through investment in retirement 
accounts.'').
---------------------------------------------------------------------------

C. Costs

    We begin the discussion with the general costs applicable to all of 
the final amendments, continue to discuss the costs specific to the new 
quantitative repurchase disclosure, and then address the costs specific 
to other amendments.\469\
---------------------------------------------------------------------------

    \469\ See Section VI for a detailed description of the estimated 
burden of the amended disclosure requirements for purposes of the 
Paperwork Reduction Act (``PRA''). 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

1. General Costs of the Disclosures
    The amended disclosure requirements will impose costs on issuers 
(and therefore existing shareholders). The costs of the additional 
quantitative repurchase disclosure include direct (compliance-related) 
costs to compile and report additional disaggregated repurchase data 
compared to what is presently required by Item 703 of Regulation S-K, 
Item 16E of Form 20-F, and Item 14 of Form N-CSR (and for FPIs not 
reporting on domestic forms, which file annual reports on Form 20-F 
today, to provide repurchase disclosures on new Form F-SR, on a 
significantly more timely and frequent basis than required today). Such 
direct costs of compliance with the final amendments may include both 
in-house counsel and external costs.
    The final amendments will also impose indirect costs, potentially 
affecting the shareholder value. A potential indirect cost of the final 
amendments is the risk of sharing sensitive information with 
competitors.\470\ It is unclear how likely it is that the amended 
disclosure requirements of historical repurchases or the disclosure of 
the rationales behind, and structure of, repurchases reveals 
significant proprietary information about the issuer's business and 
repurchase strategy, above and beyond competitive information that may 
be revealed by other disclosures about the business and financial 
condition of the issuer. Thus, we expect such indirect costs to be 
relatively modest for most issuers.
---------------------------------------------------------------------------

    \470\ See supra note 249 and accompanying text (discussing 
commenter concerns that the disclosures required by the amendments 
could divulge competitive or sensitive information). See also supra 
notes 81 and 151 and accompanying text (discussing commenter 
concerns about the additional disclosure potentially disrupting 
confidential merger negotiations).
---------------------------------------------------------------------------

    Another potential indirect cost of the amended disclosure 
requirements is the possibility that the amended disclosure 
requirements cause issuers to inefficiently decrease repurchases or 
otherwise inefficiently deviate from an optimal payout policy. For 
example, the described costs of the amended disclosure may potentially 
discourage some issuers from repurchases that would otherwise be 
optimal for shareholder value (e.g., as a more flexible method of 
payout that is generally more efficient from the personal tax 
standpoint, compared to dividends).\471\ Such issuers may instead 
inefficiently overweigh dividends \472\ or reduce overall corporate 
payouts and inefficiently retain excess cash within the firm. Further, 
if the costs of the amended disclosure requirements cause issuers to 
decrease overall payouts, even if issuers lack positive-net present 
value investment opportunities, the resulting decrease in the ability 
of investors to efficiently reallocate cash to other, higher-net 
present value investment opportunities, may potentially lead to 
inefficiencies in the aggregate allocation of capital across 
issuers.\473\ Indirect costs specific to the additional quantitative 
repurchase disclosure are discussed in Section V.C.2 below.
---------------------------------------------------------------------------

    \471\ See supra note 414. See also, e.g., letters from Davis 
Polk, DLA Piper, Quest, SCG, and Vistra. However, the personal tax 
treatment is not a concern for investors exempt from taxation.
    \472\ See, e.g., letter from PA Chamber (noting that the cost of 
the amendments will particularly affect companies that rely on share 
repurchases as a rational means of investor return and do not have 
the business model to make shareholder returns entirely or even 
partially via dividend).
    \473\ See also letter from Vistra (noting that the proposed 
daily reporting frequency requirements could be so ``unreasonably 
burdensome as to deter potential capital allocation decisions'').
---------------------------------------------------------------------------

    The described direct and indirect costs of the amended disclosure 
requirements, if realized, will decrease shareholder value for affected 
issuers.

[[Page 36041]]

    Finally, the amended disclosure requirements may also affect 
financial intermediaries involved in executing repurchases on behalf of 
issuers. Such intermediaries may incur additional costs of compiling 
disaggregated information about repurchase trades to facilitate the 
issuer's compliance with the amended disclosure requirements. Such 
information is likely to be relatively readily available. Thus direct 
costs are likely to be modest. Nevertheless, intermediaries may need to 
make incremental modifications to how they use their existing trade 
recordkeeping systems to extract and compile the information required 
by the issuer for the new disclosure. Financial intermediaries may also 
incur indirect costs of the amended disclosure requirements in the form 
of lower revenue if the amended disclosure requirements lead to a 
decrease in repurchases.\474\ Intermediaries may pass on their costs to 
issuers, which will in turn affect shareholders.
---------------------------------------------------------------------------

    \474\ See also letter from Guzman (discussing adverse 
competitive effects on smaller financial intermediaries). However, 
conversely, financial intermediaries will realize benefits in the 
form of higher revenue if the amended disclosure requirements are 
followed by an increase in repurchases.
---------------------------------------------------------------------------

2. Additional Quantitative Repurchase Disclosure
    The costs of the additional quantitative repurchase disclosure 
include direct (compliance-related) costs to compile and report 
additional disaggregated repurchase data. The aggregate direct costs of 
compliance may be larger for issuers that repurchase shares more often 
and may incur an incrementally higher cost of preparing the new 
repurchase disclosures, including the new periodic disclosure of 
historical repurchase activity disaggregated at the daily level. While 
we expect many issuers to already compile repurchase information to 
comply with current monthly aggregate reporting requirements, issuers 
that do not presently compile such repurchase information may incur 
some incremental costs to modify their recordkeeping systems and 
processes to compile such information. Issuers may incur a cost to 
prepare the new disclosures (including the cost of additional time of 
in-house counsel or the cost of retaining an outside service provider). 
In addition, issuers may need to update their internal recordkeeping 
systems and policies and procedures to maintain the information 
required by the final amendments and report it on the frequency 
required by the amendments.
    As one commenter on the daily reporting frequency proposal 
indicated, companies may incur additional costs to incorporate new 
disclosure into their disclosure controls and procedures to ensure 
accurate reporting.\475\ Another commenter on the daily reporting 
frequency proposal expressed concern about the significant time and 
expense required to collect and collate trade information, research and 
correct possible errors, and consult legal and other experts.\476\ In 
addition, some commenters pointed out that the daily disclosure may 
raise the risk of frivolous litigation, resulting in issuers incurring 
legal costs to defend against such claims.\477\
---------------------------------------------------------------------------

    \475\ See letter from Norfolk Southern.
    \476\ See letter from Empire.
    \477\ See, e.g., letters from Davis Polk, Dow, and SCG. See 
also, generally, Rogers, J. & Van Buskirk, A. Shareholder Litigation 
and Changes in Disclosure Behavior, 47 J. Acct. & Econ. 136 (2009) 
(finding that firms reduce the level of information provided after 
being involved in disclosure-related class-action securities 
litigation cases); Bourveau, T., Lou, Y., & Wang, R. Shareholder 
Litigation and Corporate Disclosure: Evidence from Derivative 
Lawsuits, 56 J. Acct. Res. 797 (2018) (finding that firms issue more 
voluntary disclosure and increaser the length of management 
discussion & analysis in their 10-K filings after passage of laws 
that make it more difficult to file derivative lawsuits). However, 
one study finds that, after accounting for endogeneity, additional 
disclosure does not increase the risk of litigation. See Field, L., 
Lowry, M., & Shu, S., Does Disclosure Deter or Trigger Litigation? 
39 J. Acct. & Econ. 487 (2005). As an important caveat, the study 
analyzes voluntary disclosure of anticipated bad earnings news 
rather than mandatory repurchase disclosures. Furthermore, to the 
extent that the disclosure raises the risk of shareholder litigation 
that is not frivolous, the threat of litigation may serve as a 
disciplinary mechanism that curtails inefficient managerial 
behavior. See, generally, Chung, C.Y., Kim, I., Rabarison, M.K., To, 
T.Y., & Wu, E. Shareholder Litigation Rights and Corporate 
Acquisitions, 62 J. Corp. Fin. 101599 (finding that ``reduced risk 
of litigation gives managers incentives to engage in value-
destroying acquisitions''); Ferris, S.P., Jandik, T., Lawless, R.M., 
& Makhija, A. Derivative Lawsuits as a Corporate Governance 
Mechanism: Empirical Evidence on Board Changes Surrounding Filings, 
42 J. Fin. & Quantitative Analysis 143 (2007) (concluding that 
``shareholder derivative lawsuits are not frivolous as is often 
claimed, but rather that they can serve as an effective corporate 
governance mechanism''); Pukthuanthong, K., Turtle, H., Walker, T., 
& Wang, J. Litigation Risk and Institutional Monitoring, 45 J. Corp. 
Fin. 342 (2017) (concluding that ``[l]itigation is an effective 
monitoring device for short-term investors that substitutes for 
internal corporate governance'').
---------------------------------------------------------------------------

    In a change from the proposal, after considering the concerns of 
commenters about the costs of the proposed daily frequency of reporting 
repurchase information,\478\ we are not requiring the daily frequency 
of reporting. We believe that preparing the disclosure of the 
disaggregated repurchase information on a quarterly basis for operating 
companies--and on a semi-annual basis for Listed Closed-End Funds--will 
considerably decrease the described costs to issuers of the final 
amendments, compared to the proposed daily reporting of disaggregated 
repurchase information. However, although there is not necessarily 
going to be a large cost impact of the final amendments on each 
individual issuer, we recognize that, due to the large number of 
repurchasing issuers (see Section V.A.1 above), the compliance costs 
across issuers that conduct repurchases may be considerable in the 
aggregate.\479\
---------------------------------------------------------------------------

    \478\ See supra note 64. But see supra notes 70-71 and 
accompanying text (discussing commenters that indicated that the 
costs of compliance with the proposed requirements would be 
minimal).
    \479\ For example, as one commenter has noted ``SIFMA 
understands from feedback that there are over 500 companies that 
repurchase shares on an average trading day.'' See letter from SIFMA 
II.
---------------------------------------------------------------------------

    The new disclosure of historical daily repurchase activity will be 
required to be filed rather than furnished. The filing requirement is 
expected to result in higher legal costs than the furnishing 
requirement, due to potential legal risk of liability under Exchange 
Act section 18.\480\ However, because the final amendments will not 
require the daily reporting frequency, and because issuers will have a 
considerable amount of time to obtain, verify, and compile the 
disclosure, the costs of filing, rather than furnishing, the new 
disclosure should be relatively modest.
---------------------------------------------------------------------------

    \480\ See also letter from NASAA (discussing concerns about 
private lawsuits if the daily repurchase disclosure is filed rather 
than furnished). See also, generally, supra note 477.
---------------------------------------------------------------------------

    The additional quantitative repurchase disclosure will also result 
in indirect costs. A key indirect cost of the proposed daily reporting 
frequency requirement, as discussed by various commenters,\481\ might 
have been that the disclosure may cause the stock price to rise faster 
than it would absent such disclosure potentially making additional 
repurchases more costly. The reason that daily reporting may have had 
this effect is that it could reveal the issuer's plans to repurchase 
additional stock to outside investors (to the extent repurchases are 
taking place over multiple months and to the extent that investors view 
repurchases as being driven by the issuer's positive outlook on the 
future stock price).\482\ To the

[[Page 36042]]

extent issuers would have incurred such a cost, other market 
participants, who would have otherwise been less informed about the 
issuer's outlook on its future share price, would have realized a 
benefit in that case. Several commenters also pointed to the potential 
for increased market volatility and investor misinterpretation of day-
to-day fluctuations in issuer repurchases as potential costs of the 
proposed daily reporting.\483\ Additional indirect costs might include 
inefficient changes to their repurchase programs in anticipation of 
potential investor scrutiny of the new disclosures.\484\ In some 
discrete instances, granular daily disclosure reporting may also 
retrospectively reveal potentially sensitive information to competitors 
due to a pattern of recent halts of daily repurchases.\485\ Because the 
final amendments are not implementing the proposed daily reporting 
frequency requirement, and are instead requiring much less frequent 
reporting of historical repurchase activity, we expect the described 
costs of the final amendments to be significantly more modest compared 
to the proposal. In particular, while all indirect costs of the 
amendments are expected to be alleviated compared to proposal, the 
costs of revelation of the issuer's repurchase strategy to other 
traders (referred to as ``front-running'' by various commenters) and 
competitors, as well as the costs of potential market volatility 
stemming from misinterpretation of daily reports of repurchase activity 
are expected to be largely eliminated. To the extent that the much more 
tailored approach to quantitative disclosures in the final amendments 
compared to the proposal reduces the overall compliance and indirect 
costs of the final amendments, in turn, the final amendments should 
result in far fewer inefficient reductions in share repurchases, 
relative to the proposal.
---------------------------------------------------------------------------

    \481\ See supra note 78 (referencing comment letters that 
discussed the front-running concern stemming from the proposed daily 
disclosure). However, because the final rules do not contain a daily 
disclosure requirement, we believe that such costs will be 
substantially alleviated, if not eliminated, compared to the 
proposal.
    \482\ This cost could be more pronounced for repurchases under a 
Rule 10b5-1(c) plan to the extent that such repurchases exhibit a 
greater degree of periodicity and occur over a period of time, 
enabling market participants to predict future repurchases to a 
greater extent based on historical daily data. However, such 
investors may benefit from being able to purchase securities before 
the issuer completes the repurchase program, potentially at a lower 
price than they would have otherwise.
    \483\ See supra notes 450-451 and accompanying text. In 
addition, as other commenters point out, an issuer's halt of 
repurchases due to a material undisclosed event or confidential 
merger discussions may trigger significant market volatility and 
potentially derail such confidential discussions. See supra notes 
80-81 and accompanying text.
    \484\ See, e.g., letters from SIFMA II and Sullivan (noting that 
some issuers may continue daily repurchases when it does not make 
financial sense to do so, to mitigate the consequences of daily 
disclosure). Other issuers may bunch large repurchases into a 
compressed time period may experience greater price impact from 
large trades. See, e.g., letter from DLA Piper (stating that the 
proposed daily disclosure could discourage more efficient daily 
repurchases and lead issuers to undertake less efficient periodic 
repurchases). See also letters from Chevron and Davis Polk, which 
note that the proposed daily disclosure requirement might have led 
issuers to follow the more costly practice of effecting larger 
repurchases on fewer days. See also supra note 90 and accompanying 
text (discussing commenter concerns that the proposed daily 
disclosure requirement might, in turn, have led issuers to limit 
their average daily repurchase trading volume to try to ensure that 
sophisticated investors view the daily trades as immaterial, even if 
a larger volume would be more beneficial to shareholders). With the 
important caveat about the difficulty of extrapolating inference 
about repurchases across international market settings, the limited 
available evidence does not point to the prevalence of such bunching 
in at least one active trading market with daily reporting of 
repurchases (the U.K.). See, e.g., Kulchania, M., & Sonika, R. 
Flexibility in Share Repurchases: Evidence from UK, 29 Eur. Fin. 
Mgmt. 196 (2023).
    \485\ See supra note 81 and accompanying text (discussing 
letters from commenters concerned about potential information 
leakage of confidential merger negotiations or another similar 
material undisclosed event, particularly, if both the prospective 
target and the prospective acquirer have halted previously regular 
repurchases). We believe that such information leakage concerns are 
not likely to be a substantial cost on most issuers, given the most 
probable repurchase strategy scenarios. To the extent such concerns 
may apply, they could be alleviated, for example, by indicating in 
the initial repurchase program announcement that the issuer plans to 
repurchase shares intermittently, or by making very minor 
modifications to the repurchase strategy that deviate from a 
completely predictable trading schedule while the program is being 
executed.
---------------------------------------------------------------------------

3. Additional Qualitative Repurchase Disclosures
    The qualitative disclosure requirements will also result in costs 
for issuers. Issuers will incur costs to provide additional disclosure 
in periodic reports (including, when required, a description of the 
rationales and structure of the repurchase program). While issuers 
likely have most of the additional information readily available, these 
disclosures may require additional time of counsel and/or management to 
describe the rationales for the repurchase program, and the program's 
structure, in the periodic report.
    The new Item 408(d) requirement for Form 10-K and 10-Q filers will 
also impose costs. Such costs will be lower for issuers that already 
disclose some information about share repurchase programs under Rule 
10b5-1. Issuers are likely to have the information required by this 
item readily available, resulting in likely modest direct costs. In the 
case of multi-quarter repurchase programs with a fairly repetitive 
schedule of pre-planned trades, new Item 408(d) in combination with the 
new disclosure of historical repurchase activity and repurchase program 
structure, may contribute to potential revelation of detailed 
information about the issuer's repurchase strategy and the potential 
timeline of likely issuer repurchase trades to other market 
participants, which could result in a less favorable repurchase price, 
particularly in cases of repurchase programs that span multiple 
quarters.\486\ In a change from the proposal, the amendments exclude 
price terms of the trading arrangement from the scope of the new 
disclosure, which should significantly alleviate such potential costs 
to issuers.
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    \486\ See supra note 345 and accompanying text. However, there 
is some evidence that even the revelation of large predictable 
planned trades may not result in such effects. See Bessembinder, H. 
et al., Liquidity, Resiliency and Market Quality Around Predictable 
Trades: Theory and Evidence, 121 J. Fin. Econ. 142 (2016) (showing, 
in a setting with large and predictable exchange-traded fund trades, 
that ``traders supply liquidity to rather than exploit predictable 
trades in resilient markets'' and not finding ``evidence of the 
systematic use of predatory strategies'').
---------------------------------------------------------------------------

    The requirement to check a box as to whether the specified officer 
or director purchased or sold securities in the four business days 
before or after a repurchase announcement will involve costs associated 
with collecting information from officers and directors. Such costs may 
be relatively modest for issuers that file on domestic forms to the 
extent that they can rely on the officers' and directors' section 16 
filings or representations about their trading activity. However, such 
costs are likely to be higher for FPIs whose senior management and 
directors are not subject to section 16.
    The amended disclosure requirements may also impose costs on 
corporate insiders. In particular, the requirement that issuers 
publicly disclose whether they have policies and procedures related to 
purchases and sales by officers and directors during repurchases, as 
well as the disclosure of whether certain officers or directors 
purchased or sold shares or other units of the class of the issuer's 
equity securities that is the subject of an issuer share repurchase 
plan or program within four business days before or after the issuer's 
announcement of such repurchase plan or program, may cause issuers to 
increasingly adopt such restrictions in anticipation of the market 
scrutiny following such disclosure.\487\

[[Page 36043]]

This disclosure requirement may impose reputational costs or draw 
additional scrutiny to officers or directors that engaged in selling 
around repurchase announcements, discouraging such selling. The 
incremental costs of this disclosure requirement to corporate insiders 
of many issuers that file on domestic forms are generally likely to be 
small \488\ to the extent the investors can already obtain the same 
information from beneficial ownership disclosures and public 
announcements of repurchases. However, as some commenters indicated, 
there may be potential for misinterpretation that could follow from the 
checkbox disclosure, whereby investors draw conclusions about insider 
trading activity occurring in proximity to repurchase activity that are 
inaccurate.\489\ The costs may be higher for senior management and 
directors of FPIs that do not have a section 16 reporting obligation. 
In a change from the proposal, after considering commenter concerns 
about the checkbox disclosure, we are limiting the checkbox disclosure 
to insider trading within four business days, rather than ten business 
days, before and after the repurchase announcement. By focusing the 
disclosure on a narrower time frame more specific to the repurchase 
announcement, this change is expected to reduce some of the costs of 
the disclosure to issuers and insiders, relative to the proposal.
---------------------------------------------------------------------------

    \487\ See, e.g., letter from PNC (expressing concern that the 
requirement to disclose policies and procedures relating to trading 
by officers and directors during a repurchase program could create 
an expectation that issuers must have such policies) and letter from 
Quest (expressing concern that it may end up either having to 
restrict officers and directors from trading during share 
repurchases, or consider the impact on officers and directors when 
scheduling its repurchases). Any restrictions an issuer imposes on 
officer and director trading, for instance, in anticipation of 
investor scrutiny of the new disclosures, could also limit the 
ability of corporate insiders to purchase or sell securities at 
issuers that conduct repurchases periodically over an extended 
period of time (such as open market repurchases under a multi-
quarter program, or a Rule 10b5-1 plan). To the extent any such 
restrictions limit insider sales, they may decrease the liquidity of 
insiders' holdings of an issuer's securities.
    \488\ Officers and directors of FPIs are not subject to section 
16 reporting obligations and would therefore incur higher costs.
    \489\ See supra note 284 and accompanying and following text 
(discussing commenter concerns about misinterpretation of the 
checkbox disclosure).
---------------------------------------------------------------------------

    To the extent that the requirement to disclose whether any officer 
or director has purchased or sold securities around the repurchase 
announcements leads some companies to forgo making a repurchase 
announcement to limit market scrutiny, the amount of information 
available to investors about companies' forward-looking repurchase 
plans may decrease. Importantly, the described costs are likely to be 
small in the case of many issuers that file on domestic forms \490\ to 
the extent that investors can already readily obtain the same 
information by combining beneficial ownership disclosures of officer 
and director trades with public announcements of repurchases.
---------------------------------------------------------------------------

    \490\ See supra note 464.
---------------------------------------------------------------------------

4. Inline XBRL
    The requirement to use a structured data language for reporting the 
newly required disclosures will impose incremental compliance costs on 
issuers.\491\ Such costs are expected to be modest as issuers affected 
by the amendments (including SRCs and FPIs) already are required to use 
Inline XBRL to comply with other disclosure obligations. Moreover, the 
scope of the disclosures required to be reported using a structured 
data language is limited and thus will require a relatively simple 
taxonomy of additional tags, minimizing initial and ongoing costs of 
complying with the new tagging requirement.
---------------------------------------------------------------------------

    \491\ See letter from NYC Bar (expressing concern regarding the 
``unnecessary and significant'' compliance costs and complexity that 
would result from the Inline XBRL requirement). See also letter from 
VEUO (stating, with respect to foreign private issuers, that the 
structured data requirement would be an additional and unnecessary 
burden for such issuers).
---------------------------------------------------------------------------

D. Efficiency, Competition, and Capital Formation

    On balance we expect that the final amendments may have positive 
overall effects on efficiency, competition, and capital formation. In 
particular, a decrease in the information asymmetry between issuers and 
investors about the value of an issuer's securities as a result of the 
disclosure may lead to more informationally efficient prices, and more 
efficient capital allocation in investor portfolios.\492\ The decrease 
in information asymmetry among investors can alleviate adverse 
selection costs and improve stock liquidity. Decreased information 
asymmetries between investors and issuers as a result of the enhanced 
disclosure under the amendments may also incrementally facilitate 
capital formation and reduce the cost of capital.\493\ Further, by 
enabling public disclosure of additional repurchase information, the 
amendments may result in information being more fully incorporated into 
share prices, and therefore, more informationally efficient share 
prices. Taken together, the final rules may contribute to more 
efficient allocation of capital, capital formation, competition, and 
the maintenance of fair and orderly markets. Some commenters on the 
daily reporting proposal \494\ asserted that daily repurchase 
disclosure furnished one business day after an issuer repurchase may 
contain considerable noise, which may lead some investors to draw 
inaccurate inferences, reducing these information benefits and 
potentially leading to increased volatility and speculative trading. 
This consideration is more likely to be pronounced for issuers with a 
less sophisticated investor base. As discussed in Section V.C.2 above, 
because the final amendments are not implementing the daily reporting 
frequency requirement, we believe that these concerns are likely to be 
substantially alleviated, if not fully addressed, under the final 
amendments.
---------------------------------------------------------------------------

    \492\ But see supra note 445.
    \493\ As discussed above, the final rules are expected to reduce 
information asymmetry between investors and repurchasing issuers, 
which can reduce investors' uncertainty about estimated future cash 
flows, thus lowering the risk premium they demand and, potentially, 
issuer cost of capital. See, e.g., Easley and O'Hara (2004); 
Botosan, C., Disclosure and the Cost of Capital: What Do We Know?, 
36 Acct. & Bus. Res. 31 (2006) (stating that ``[t]he overriding 
conclusion of existing theoretical and empirical research is that 
greater disclosure reduces cost of capital''); Lambert, R., Leuz, 
C., & Verrecchia, R., Accounting Information, Disclosure, and the 
Cost of Capital, 45 J. Acct. Res. 385 (2007) (showing, in a 
conceptual framework, that ``increasing the quality of mandated 
disclosures should in general move the cost of capital closer to the 
risk-free rate'' and ``generally reduce the cost of capital for each 
firm in the economy'' and further noting that ``the benefits of 
mandatory disclosures are likely to differ across firms.''); 
Accelerated Filer and Large Accelerated Filer Definitions, Rel. No. 
34-88365 (Mar. 12, 2020) [85 FR 17178 (Mar. 26, 2020)], at 17215, 
note 477. As a caveat, while the cited examples relate to disclosure 
and cost of capital, they examine other disclosure contexts (not the 
frequency of share repurchase reporting), as pointed out by a 
commenter. See letters from Chamber II and Profs. Lewis and White.
    \494\ See supra notes 79-81.
---------------------------------------------------------------------------

    To the extent that the amended requirements affect smaller issuers 
to a greater extent than larger issuers, they could result in adverse 
effects on competition.\495\ The fixed component of the legal costs of 
preparing the disclosure could be one contributing factor.\496\ The 
lower liquidity of smaller issuers' securities,\497\ which may

[[Page 36044]]

exacerbate the price impact of the new disclosure, may also contribute 
to disproportionate effects of the disclosure on smaller issuers. The 
latter effect could be mitigated by the lower incidence, and the lower 
average level (relative to issuer size), of repurchases among smaller 
issuers.\498\ To the extent that the quarterly reporting of repurchases 
for FPIs that file on Form 20-F is a significant additional cost \499\ 
for such issuers as they do not file quarterly reports with the 
Commission, such costs may discourage some foreign issuers from listing 
in the U.S. market, resulting in adverse effects on competition. 
Compared to the proposal, the much lower frequency of reporting of 
additional disaggregated repurchase information is expected to 
significantly reduce the compliance and indirect costs of the 
disclosure requirements in the final amendments. As a result, to the 
extent that smaller filers would have incurred a disproportionate 
impact of the new disclosures, this change will also reduce the 
potential negative effects of the amendments on competition, compared 
to the proposal.
---------------------------------------------------------------------------

    \495\ See, e.g., letters from ACCO and Profs. Lewis and White. 
See also letter from Guzman (stating that the proposed disclosures 
could negatively affect competition in the financial services sector 
by inducing issuers to use larger intermediaries instead of smaller 
financial firms).
    \496\ In the case of funds, while we expect larger Listed 
Closed-End Funds and business development companies, or funds that 
are part of a large fund complex, to incur higher costs related to 
final amendments in absolute terms relative to a smaller fund or a 
fund that is part of a smaller fund complex, we expect a smaller 
fund to find it more costly, per dollar managed, to comply with the 
final amendments because it would not be able to benefit from a 
larger fund complex's economies of scale.
    \497\ See, e.g., Amihud, Y. & Mendelson, H., Liquidity and Stock 
Returns, 42 Fin. Analysts J. 43 (1986) (noting that ``[t]he stocks 
of small firms suffer from market `thinness,' which impairs their 
liquidity''.); Duarte, H. & Young, L., Why is PIN priced? 91 J. Fin. 
Econ. 119 (2009) (in Table 6, showing that larger firm size is 
correlated with higher liquidity based on different measures); 
Collver, C., A Characterization of Market Quality for Small 
Capitalization US Equities, September 2014, available at https://www.sec.gov/files/marketstructure/research/small_cap_liquidity.pdf 
(2014) (finding that ``[s]mall cap stocks had larger quoted and 
effective spreads and traded much lower volumes than mid cap 
stocks'' and that ``[l]iquidity improved with market 
capitalization'').
    \498\ See, e.g., Dittmar, A., Why Do Firms Repurchase Stock, 73 
J. Bus. 331 (2000) (finding that ``large firms are the dominant 
repurchasers''); Cheng et al. (2015) (showing in Table 2 that 
repurchasing firms are significantly larger than nonrepurchasing 
firms); Jiang, Z., Kim, K.A., Lie, E., and Yang, S., Share 
Repurchases, Catering, and Dividend Substitution, 21 J. Corp. Fin. 
36 (2013) (showing in Table 5 that firm size is positively related 
to the fraction of outstanding share purchases by firms on a monthly 
basis).
    \499\ FPIs may file current reports with the Commission on a 
more frequent basis. Further, some FPIs already are subject to more 
granular repurchase reporting requirements in their home 
jurisdiction, in which case their incremental cost of complying with 
the final amendments may be lower than for domestic issuers.
---------------------------------------------------------------------------

    As discussed in Section V.C.1 above, a potential indirect cost of 
the amended disclosure requirements is the possibility that issuers 
inefficiently decrease repurchases. Further, to the extent that 
repurchases currently contribute to more informationally efficient 
prices and greater liquidity,\500\ any inefficient reduction in 
repurchases in response to the amended disclosure requirements will 
result in the indirect costs of decreased price efficiency (partly 
offset by the information benefits of the new disclosures) and 
decreased liquidity. We have discussed mitigating factors for these 
effects in detail in Section V.C.1 above. As discussed in Section V.C.1 
above, we also believe that the change to the frequency of reporting 
the disaggregated repurchase information is likely significantly 
alleviate these concerns, compared to the proposal.
---------------------------------------------------------------------------

    \500\ See supra note 433.
---------------------------------------------------------------------------

E. Reasonable Alternatives

1. Alternative Reporting Frequencies and Disclosure Granularity
    In a change from the proposal, the final amendments require 
corporate issuers that file on domestic forms that engage in share 
repurchases to report information on repurchases conducted during each 
quarter, disaggregated on a day-by-day basis, as suggested by two 
commenters.\501\ Relatedly, we are requiring FPIs not reporting on 
domestic forms to report the same share repurchase information on Form 
F-SR. Listed Closed-End Funds that report on Form N-CSR will be 
required to report the information on repurchases, similarly 
disaggregated on a day-by-day basis, on a semi-annual basis. As an 
alternative, we could require issuers to report repurchase activity 
disaggregated on a less granular basis--such as biweekly basis, as 
suggested by one commenter,\502\ or weekly basis, as suggested by other 
commenters.\503\ Compared to the final amendments, this alternative 
would decrease direct and indirect issuer costs associated with the 
amended disclosure requirements, as discussed in greater detail in 
Section V.C above. In turn, it would also reduce the information 
benefits of the disclosure to investors, discussed in greater detail in 
Section V.B above, compared to the final amendments. The net effects 
would be smaller if the daily repurchase trading has relatively little 
incremental information content compared to the more aggregated--weekly 
or bi-weekly--totals (e.g., exhibits relatively little variation from 
day to day in repurchase volumes and prices), if existing market data 
is sufficiently informative about likely issuer repurchases (due to 
price impact of large repurchases, even absent disclosure), or if 
investors are unable to accurately parse historical repurchase data 
disaggregated on a daily basis (e.g., due to noise, as suggested by 
some commenters \504\).
---------------------------------------------------------------------------

    \501\ See supra notes 110-111.
    \502\ See letter from Home Depot.
    \503\ See, e.g., letters from BrilLiquid, Guzman, Hecht, and 
Pentacoff.
    \504\ See supra notes 483-484 and accompanying text.
---------------------------------------------------------------------------

    As another alternative, we could adopt a more frequent repurchase 
reporting requirement--for example, a daily reporting frequency 
requirement, as proposed,\505\ a weekly reporting frequency 
requirement,\506\ or a monthly reporting frequency requirement.\507\ 
Compared to the final amendments, requiring more frequent reporting 
would provide investors with less delayed information about issuer 
repurchases and potentially enable them to perform a more timely 
evaluation of an issuer's repurchase activity, independently or in 
conjunction with other disclosures. This alternative may enable 
investors that trade based on short-term information to construct a 
potentially better informed trading strategy, as well as gauge more 
quickly the extent to which recent repurchases, conducted at a specific 
point in time, were likely to be aligned with shareholder value 
maximization. Such effects would be larger if the alternative 
disclosure frequency is higher and/or if the repurchase information is 
of a time-sensitive nature. In turn, more frequent reporting, 
particularly, the daily reporting frequency, would dramatically 
increase issuer costs, including compliance costs, front-running risks, 
indirect costs due to potentially inefficient decrease in repurchases, 
and other costs discussed in detail in Section V.C above, compared to 
the final amendments and the baseline, as noted by various 
commenters.\508\
---------------------------------------------------------------------------

    \505\ See supra note 65.
    \506\ See supra note 116.
    \507\ See supra notes 113 (supporting monthly reporting of daily 
data), 114 (proposing, among various alternatives, monthly reporting 
of biweekly data), and 115 (recommending monthly reporting of 
monthly aggregate historical repurchase activity).
    \508\ See supra notes 481 (discussing front-running costs) and 
484 (discussing potential for inefficient efforts to restructure 
repurchase programs in an attempt to minimize the effects of front-
running and price impact of the daily reporting) and accompanying 
text.
---------------------------------------------------------------------------

    As another alternative, we could adopt a combination of alternative 
reporting frequency and an alternative level of disaggregation of the 
reported data. For example, we could require reporting of monthly 
repurchase activity information on a monthly basis, as suggested by 
various commenters.\509\ The costs and benefits of this alternative, 
compared to the final amendments, would be determined by the tradeoffs 
described above with respect to the greater timeliness of information 
as well as a lower level of granularity of repurchase data.
---------------------------------------------------------------------------

    \509\ See supra note 115.
---------------------------------------------------------------------------

2. Alternative Scope of the Disclosure
    We could modify the scope of the amended disclosure, for instance, 
omitting information about the use of Rule 10b-18 and/or Rule 10b5-1 in 
the

[[Page 36045]]

new quantitative disclosure,\510\ information about the objectives and 
rationales for repurchases,\511\ information about issuer trading plans 
in new Item 408(d), or information about any policies and procedures 
relating to purchases and sales of the issuer's securities by officers 
and directors during repurchases, including any restrictions on such 
transactions.\512\ Compared to the final amendments, narrowing the 
scope of the required disclosure would reduce the costs to issuers. 
However, this alternative would also provide less information to 
investors and result in potentially greater information asymmetry, 
compared to the final amendments. As another alternative, we could 
expand the scope of the amended disclosure, for instance, requiring 
additional disclosure in periodic reports about how issuers are 
financing their share repurchases, as suggested by some 
commenters.\513\ Compared to the final amendments, broadening the scope 
of the required disclosure would increase the costs to issuers. 
However, this alternative could also on the margin provide additional 
information to investors, compared to the final amendments. The 
information benefit would depend on whether investors already are able 
to infer the additional information from other financial statement 
disclosures and MD&A discussion. For example, some investors may be 
able to use existing financial statement disclosures to infer whether 
debt or other sources of funds were used for share repurchases.
---------------------------------------------------------------------------

    \510\ See supra note 150. But see supra notes 146-149.
    \511\ See supra note 248.
    \512\ See, e.g., letter from PNC (expressing concern that ``such 
disclosure requirements are often seen as creating an expectation 
that well-managed companies should have such policies and 
procedures'').
    \513\ See, e.g., letters from Senators Rubio & Baldwin, CalPERS, 
Prof. Palladino, Roosevelt, AFREF et al., Better Markets, and CFA 
Institute.
---------------------------------------------------------------------------

3. Exemptions for Certain Issuer Categories
    We could provide exemptions from all, or some, of the amended 
disclosure requirements, or modify the disclosure requirements, for 
SRCs.\514\ As another alternative, we could require only the reporting 
of repurchases that exceed a certain threshold, such as one or two 
percent of the number of shares outstanding,\515\ or provide a 
principles-based exemption from the additional disclosure requirements 
for repurchases that are not material.\516\ These alternatives could 
reduce the aggregate costs of the rule but also reduce the information 
available to investors, compared to the final amendments. The economic 
effects of the alternative of excluding small filers are uncertain to 
the extent that the effects of the amended disclosure on small issuers 
are somewhat ambiguous. On the one hand, smaller issuers are more 
likely to be affected by the costs of additional disclosure, all else 
equal (holding constant the disclosure burden). On the other hand, 
smaller issuers are less likely to have repurchases,\517\ which limits 
the incremental burden (as well as the incremental benefits) of 
additional reporting under the amendments for each small filer. 
Further, to the extent that small filers have relatively high 
information asymmetries because of lower analyst and institutional 
coverage, disclosure about their repurchases may be relatively more 
informative to investors.\518\
---------------------------------------------------------------------------

    \514\ See supra notes 131-135.
    \515\ See supra notes 101-104. See also letter from ABA 
Committee (recommending a higher, five percent, trigger for SRCs).
    \516\ See also, e.g., letter from Cravath (recommending that a 
share repurchase plan that is not material not be required to be 
disclosed publicly on periodic reports).
    \517\ See supra notes 134-135 and accompanying text.
    \518\ See also supra note 129 (discussing comment letters that 
recommended not exempting smaller issuers from the amendments).
---------------------------------------------------------------------------

    As another alternative, we could provide exemptions or different 
requirements for FPIs not reporting on domestic forms,\519\ Listed 
Closed-End Funds,\520\ or issuers without an established securities 
market.\521\ These alternatives would eliminate or reduce the costs for 
the affected issuers but also reduce the information benefits for 
investors in these issuers, compared to the final amendments. For 
example, as suggested by commenters, not all of the motivations for 
corporate issuers' share repurchases will apply to Listed Closed-End 
Funds because of differences in the business model and organizational 
structure of a fund as compared to a corporate issuer.\522\ We believe, 
however, that investors would benefit from receiving timely details 
about a fund's repurchase activity so they can make an informed 
decision as to whether the fund's share price has been influenced by 
this repurchase activity, which is difficult to do without the daily 
details the final amendments will provide.
---------------------------------------------------------------------------

    \519\ See supra note 122.
    \520\ See supra note 140 and accompanying text.
    \521\ See supra note 136 and accompanying text.
    \522\ See supra note 140 and accompanying text.
---------------------------------------------------------------------------

    Additionally, exempting FPIs reporting on FPI forms would prevent 
the affected issuers from incurring the cost of multiple, different 
layers of repurchase disclosures (and in some cases, on the margin 
potentially adding to the burden of U.S. disclosure requirements that 
can discourage a U.S. listing). However, it would also reduce the 
amount of information available to investors, potentially reducing 
their ability to make informed investment decisions, compared to the 
final amendments.\523\ Further, exempting such issuers may place them 
at a relative competitive advantage to issuers subject to the new 
disclosure requirements. Ultimately, the aggregate effects of exempting 
these categories of issuers may be incremental as such issuers engage 
in relatively fewer repurchases than domestic issuers, as seen in 
Section V.A.1 above.
---------------------------------------------------------------------------

    \523\ See also supra note 123 and accompanying text (discussing 
comment letters that supported the benefits of extending the 
amendments to foreign private issuers).
---------------------------------------------------------------------------

    Relatedly, exempting unlisted issuers or issuers without any 
established securities market more generally would eliminate the costs 
of the amendments for such issuers.\524\ Nevertheless, investors in 
such issuers would lose the information benefits of the additional 
disclosures, which might be relatively more consequential for investors 
in issuers with a thin trading market or without a trading market that 
lack the price discovery from active trading. The discussion of the 
alternative of exempting small issuers also pertains to unlisted 
issuers or issuers without an established securities market to the 
extent that such issuers tend to be smaller companies.
---------------------------------------------------------------------------

    \524\ See letter from Publix. Based on staff analysis of section 
12(b) registration status data on issuers with an exchange-listed 
class of securities and of Over-the-Counter (``OTC'') Markets' data 
on OTC quotation for 2021, we estimate that an established 
securities market cannot be identified for approximately 500 out of 
7,500 affected filers of Forms 10-Q, 10-K, or 20-F and for 
approximately 100 out of 3,600 issuers that undertook repurchases. 
See also supra notes 374 and 376.
---------------------------------------------------------------------------

    As another alternative, suggested by some commenters,\525\ we could 
exempt bank holding companies from the amended disclosure requirements. 
Under this alternative, banks would not incur the costs of the 
amendments discussed in Section V.C above (including the cost of 
potentially divulging confidential information).\526\ The incremental 
effect on bank investors may be smaller to the extent that banks' use 
of capital is subject to significant regulatory oversight and banks 
already disclose more capital and capital planning information than 
other

[[Page 36046]]

issuers.\527\ Nonetheless, we believe that information about issuer 
repurchases under the final amendments is valuable for addressing 
information asymmetries between banks and their investors. Under this 
alternative, bank investors would receive significantly less 
information about issuer repurchases, compared to the final amendments.
---------------------------------------------------------------------------

    \525\ See supra note 140.
    \526\ Id.
    \527\ Id.
---------------------------------------------------------------------------

4. Alternative Implementation Approaches
    We could modify some of the elements of implementation of the 
amended disclosure requirements. The final amendments require daily 
repurchase data to be reported periodically (as an exhibit to Forms 10-
Q and 10-K, on Form N-CSR, and for FPIs reporting on FPI forms, on new 
Form F-SR). As one alternative, we could require all issuers, rather 
than only FPIs, to report the historical daily repurchase information 
on a new form. By introducing a new form for all issuers, this 
alternative could incrementally increase the initial transition costs, 
compared to the final amendments. On balance, this alternative is 
unlikely to impact ongoing disclosure costs, compared to the final 
amendments, holding the scope and frequency of the required disclosure 
constant. However, in the case of Listed Closed-End Funds, such an 
alternative would require more frequent--quarterly, rather than semi-
annual--reporting of historical daily repurchase data resulting in 
timelier disclosure of such information to investors and higher direct 
and indirect costs of reporting (described in greater detail in Section 
V.C. above) for affected issuers, compared to the final amendments. 
Compared to corporate issuers, relatively few funds engage in share 
repurchases, as discussed in Section V.A.1 above. Thus, the aggregate 
costs and benefits of such an alternative for affected fund issuers are 
likely to be modest.\528\ As another alternative, we could require 
issuers that file on Forms 10-K and 10-Q to provide the same historical 
daily repurchase disclosure in the body of the form, rather than in an 
exhibit. Moving the disclosure from the exhibit to the body of the form 
is not expected to affect the costs for issuers or informational 
benefits to investors, conditional on the contents of the disclosure 
requirements remaining the same. In cases of issuers with more daily 
repurchases to be disclosed, the increase in the length of the main 
body of the periodic report under this alternative could make the 
periodic report somewhat less readable to investors (especially those 
investors not specifically seeking daily repurchase data), compared to 
the final amendments.
---------------------------------------------------------------------------

    \528\ See also supra note 140 and accompanying text (discussing 
potentially smaller benefits for funds).
---------------------------------------------------------------------------

    We are eliminating the existing requirement to provide monthly 
breakdowns of repurchase activity in periodic reports. As an 
alternative, we could retain this requirement. The costs and benefits 
of this alternative compared to the final amendments are similarly 
likely to be fairly incremental because the aggregation of daily 
information into a monthly breakdown is likely to be low-cost for 
filers, and of relatively little incremental importance to investors.
    As another alternative, we could require that issuers announce all 
share repurchase plans in advance, as suggested by a few 
commenters.\529\ Under this alternative, investors may benefit from 
additional information related to the issuer's future repurchase plans. 
The incremental benefit of the requirement may be limited for issuers 
that already routinely disclose repurchase announcements--under 
exchange listing standards, companies are required to promptly disclose 
material new developments, and, according to at least one law firm, 
board authorization of a buyback is generally treated as requiring 
disclosure under these standards.\530\ However, such an alternative 
would ensure greater consistency, particularly among non-exchange-
listed issuers, in the information being made available to investors 
about an issuer's future repurchase plans. As discussed in Section V.A. 
above, the authorization of a repurchase program can indicate the 
issuer's belief that the stock is undervalued or convey other value-
relevant information to investors. At the same time, to the extent that 
issuers that do not presently pre-announce repurchase programs avoid 
such announcements because such announcements would be costly for 
them--for instance, by effecting a greater degree of upward price 
pressure than subsequent periodic reporting of repurchase activity, and 
therefore increasing the price of the purchased shares--this 
alternative would impose greater cost on such issuers (and their 
existing shareholders that do not sell during a repurchase program), 
compared to the final amendments.
---------------------------------------------------------------------------

    \529\ See, e.g., letters from CFA Institute; CalPERS; 
BrilLiquid; and ICGN.
    \530\ See SEC Proposes Rules to Modernize Share Repurchase 
Disclosures, Wilmer Hale (Dec. 27, 2021), https://www.wilmerhale.com/insights/client-alerts/20211227-sec-proposes-rules-to-modernize-share-repurchase-disclosures.
---------------------------------------------------------------------------

5. Structured Disclosure
    As another alternative, we could scale the structured disclosure 
requirements compared to the amendments, for instance, by not requiring 
that the quantitative disclosure in periodic reports, or the narrative 
disclosure, be structured. These alternatives could incrementally 
increase the cost of the extraction and analysis of additional 
information about the structure and purpose of repurchase programs, 
compared to the final amendments. At the same time, the incremental 
cost savings for issuers, compared to the final amendments, would 
likely be modest since affected filers already tag various other 
disclosures in their filings with the Commission.\531\
---------------------------------------------------------------------------

    \531\ See 17 CFR 232.405(b) (setting forth structured disclosure 
requirements for, inter alia, corporate issuers and closed-end 
management investment companies).
---------------------------------------------------------------------------

6. Compliance Dates
    FPIs that file on FPI forms will be required to comply with the new 
disclosure requirements in the first filing that covers the first full 
fiscal quarter that begins on or after April 1, 2024; Listed Closed-End 
Funds--in the first filing that covers the first fiscal period that 
begins on or after January 1, 2024; and all other issuers--in the first 
filing that covers the first full fiscal quarter that begins on or 
after October 1, 2023. As an alternative, we could provide a longer 
transition period (for example, for up to one year after the effective 
date of the final rules), as suggested by some commenters.\532\ Under 
this alternative, the costs and benefits of the final amendments 
discussed above would be deferred until the compliance date. Further, 
to the extent that affected issuers and intermediaries that assist them 
with the execution of repurchase programs require some time to 
implement new systems, processes, and policies to gather information 
for the new disclosures, the alternative could further incrementally 
mitigate some of the initial transition challenges and associated 
burden, by enabling affected issuers to do so with fewer time 
pressures.
---------------------------------------------------------------------------

    \532\ See, e.g., letters from SIFMA II; Sullivan; Wilson 
Sonsini.
---------------------------------------------------------------------------

VI. Paperwork Reduction Act

A. Summary of the Collections of Information

    Certain provisions of our rules and forms that will be affected by 
the final

[[Page 36047]]

amendments contain ``collection of information'' requirements within 
the meaning of the PRA.\533\ The Commission published notices 
requesting comment on revisions to these collections of information 
requirements in the Proposing Release and the Rule 10b5-1 Proposing 
Release, and it has submitted these requirements to the Office of 
Management and Budget (``OMB'') for review in accordance with the 
PRA.\534\ The hours and costs associated with preparing and filing the 
forms constitute reporting and cost burdens imposed by each collection 
of information. An agency may not conduct or sponsor, and a person is 
not required to comply with, a collection of information unless it 
displays a currently valid OMB control number. Compliance with the 
information collections is mandatory. Responses to the information 
collections are not kept confidential and there is no mandatory 
retention period for the information disclosed. The titles for the 
affected collections of information are:
---------------------------------------------------------------------------

    \533\ See supra note 469.
    \534\ See 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

     ``Form 10-K'' (OMB Control No. 3235-0063);
     ``Form 10-Q'' (OMB Control No. 3235-0070);
     ``Form 20-F'' (OMB Control No. 3235-0288);
     ``Form N-CSR'' (OMB Control No. 3235-0570); and
     ``Form F-SR'' (a new collection of information).
    We adopted the existing forms pursuant to the Exchange Act and 
Investment Company Act, and are adopting the new form pursuant to the 
Exchange Act. The forms set forth the disclosure requirements for 
periodic reports filed by issuers to help investors make informed 
investment and voting decisions. A description of the final amendments, 
including the need for the information and its use, as well as a 
description of the likely respondents, may be found in Sections I, II, 
and III above, and a discussion of the economic effects of the proposed 
amendments may be found in Section V above.

B. Summary of Comment Letters

    In the Proposing Release, the Commission requested comment on the 
PRA burden hour and cost estimates and the analysis used to derive such 
estimates. One commenter directly addressed the PRA analysis of the 
proposed amendments,\535\ and other commenters provided responses to 
certain requests for comment that have informed some of our PRA 
estimates.\536\ Generally, these commenters asserted that the costs and 
burdens of the proposed amendments would likely be greater than what 
the Commission estimated in the Proposing Release.
---------------------------------------------------------------------------

    \535\ See letter from Empire.
    \536\ See, e.g., letters from Norfolk Southern and SIFMA II.
---------------------------------------------------------------------------

    In the Rule 10b5-1 Proposing Release, the Commission similarly 
requested comment on the PRA burden hour and cost estimates and the 
analysis used to derive the estimates in that release. We did not 
receive any comments that directly addressed the PRA analysis of those 
proposed amendments. However, as noted in the Rule 10b5-1 Adopting 
Release, we made some changes to proposed Item 408(a) as a result of 
comments received in response to the Rule 10b5-1 Proposing Release and 
revised our estimates, taking into account the changes and the comments 
received. New Item 408(d) that we are adopting in this release reflects 
corresponding changes.

C. Summary of Collections of Information Requirements

    As discussed in more detail in the Proposing Release \537\ and the 
Rule 10b5-1 Proposing Release,\538\ we derived the burden hour 
estimates by estimating the change in paperwork burden as a result of 
the amendments. As noted in Section III, we have made some changes to 
the proposed amendments as a result of comments received, and have 
revised our PRA estimates to take into account these changes.
---------------------------------------------------------------------------

    \537\ See Section V of the Proposing Release, supra note 2.
    \538\ See Section V of the Rule 10b5-1 Proposing Release, supra 
note 17.
---------------------------------------------------------------------------

1. Estimated Paperwork Burden for Daily Quantitative Share Repurchase 
Disclosures
    In the Proposing Release, we estimated a burden of 1.5 hours for 
each proposed Form SR, which would include the effects of compiling the 
required data elements for each date that the form would be required, 
tagging the data using Inline XRBL, and preparing and submitting the 
form. Although the final amendments require the same additional detail 
regarding the structure of an issuer's repurchase program and its daily 
share repurchases as in the Proposing Release, the frequency and manner 
of the disclosure is different from the proposal. Instead of requiring 
issuers to provide quantitative daily repurchase disclosure on a new 
Form SR one business day after execution of an issuer's share 
repurchase order, as proposed, the final amendments require issuers to 
provide quantitative daily repurchase disclosure on a less frequent 
periodic basis.\539\
---------------------------------------------------------------------------

    \539\ The final amendments require domestic corporate issuers 
and FPIs filing on the FPI forms to file their information quarterly 
in their Form 10-Q and Form 10-K (for an issuer's fourth fiscal 
quarter) and new Form F-SR, respectively, and Listed Closed-End 
Funds to file that information semi-annually in Form N-CSR.
---------------------------------------------------------------------------

    The final amendments require corporate issuers reporting on 
domestic forms and Listed Closed-End Funds to file daily aggregated 
repurchase data in their periodic reports, and FPIs filing on the FPI 
forms to file daily aggregated repurchase data quarterly on new Form F-
SR. The repurchase data is to be tagged using Inline XBRL.\540\ The 
final amendments require disclosure of a potentially greater quantity 
of repurchase data in the particular periodic filing (repurchases over 
a quarterly or six-month period, depending on the filer) than would 
have been required under proposed Form SR, which would have only 
included the repurchases from one day.\541\ In consideration of these 
changes, we are estimating the burden hours for the daily quantitative 
share repurchase disclosure to be 5.0 hours.
---------------------------------------------------------------------------

    \540\ Any burdens associated with interactive data associated 
with the final amendments are estimated to be negligible. For 
administrative simplicity, these burdens therefore are incorporated 
into the burdens associated with the forms, discussed below.
    \541\ We recognize that, for issuers to prepare monthly 
repurchase data under the current disclosure requirement, they may 
already be collecting daily repurchase data. As a result, they may 
already have the systems or processes in place to collect or report 
some of the repurchase data, which they may be able to leverage for 
the new disclosure and may mitigate some of the burdens.
---------------------------------------------------------------------------

    We recognize that the burden hours may be higher or lower depending 
on the number of applicable repurchases that the issuer conducts in the 
period covered by the form. These adjustments will be reflected on 
Forms 10-Q, 10-K, N-CSR, and F-SR.\542\ Because any disclosure under 
the final amendments would be made quarterly or semi-annually, 
depending on the filer type, rather than daily, in total we estimate 
that the burdens and costs of the final amendments should be lower than 
for the proposed amendments.\543\
---------------------------------------------------------------------------

    \542\ We also estimate a burden of 1.0 hour to submit new Form 
F-SR. The other forms are existing forms that already reflect a 
submission burden.
    \543\ We believe the costs for issuers will be lower on an 
annual basis because issuers will be required to provide this 
disclosure a maximum of four times per year for domestic corporate 
issuers and FPIs, and a maximum of two times per year for 
registered-closed end funds. The proposed amendments would likely 
have required issuers to provide significantly more forms per year 
at a greater cost than the final amendments because the proposed 
amendments would have required issuers to provide proposed Form SR 
one business day after execution every one of an issuer's share 
repurchase orders. See letter from SIFMA II (``Additionally, time 
and cost implications should also be considered. The 1.5 hours per 
day preparation time estimated by the SEC quickly turns into 7.5 
hours a week, or more for those who are in the market daily, for the 
duration of the share repurchase plan.'').

---------------------------------------------------------------------------

[[Page 36048]]

    Additionally, issuers are required currently to file monthly 
aggregated repurchase data in their periodic reports. We are 
eliminating this requirement. Accordingly, for PRA purposes, we 
estimate a reduction in costs and burdens associated with this 
requirement of 2.0 hours. These adjustments will be reflected in Forms 
10-K, 10-Q, N-CSR, and 20-F.
    Our estimates are for the average burden over the first three years 
of reporting.\544\ The following table summarizes the estimated 
paperwork burden associated with the final amendments' required daily 
quantitative repurchase disclosures for issuers of equity securities 
registered under section 12 of the Exchange Act in existing Forms 10-K, 
10-Q, and N-CSR, and in new Form F-SR and the elimination of the 
monthly repurchase disclosures in Forms 10-K, 10-Q, N-CSR, and 20-F.
---------------------------------------------------------------------------

    \544\ We acknowledge that final amendments may initially entail 
a higher burden as issuers get accustomed to collecting data for, 
and preparing, the form. We believe, however, that the burden will 
be reduced with subsequent filings.

   PRA Table 1--Estimated Paperwork Burden of Daily Quantitative Share
Repurchase Disclosures and Elimination of Monthly Repurchase Disclosures
------------------------------------------------------------------------
                                                    Brief explanation of
        Affected forms           Estimated burden     estimated burden
------------------------------------------------------------------------
Form 10-K, Form 10-Q, Form N-   An increase of     This estimated burden
 CSR.                            5.0 burden hours   includes the
                                 for each           estimated 5.0-hour
                                 affected form.     burden for the
                                                    compilation of the
                                                    data elements,
                                                    tagging the data
                                                    using Inline XBRL,
                                                    and preparing the
                                                    exhibit (in Form 10-
                                                    K and 10-Q) or table
                                                    (in Form N-CSR).
Form F-SR.....................  6.0 burden hours   This estimated burden
                                 for each           includes the
                                 affected form.     estimated 5.0-hour
                                                    burden for the
                                                    compilation of the
                                                    data elements,
                                                    tagging the data
                                                    using Inline XBRL,
                                                    and preparing the
                                                    form, plus a 1.0-
                                                    hour burden for
                                                    submitting the Form
                                                    F-SR.
Form 10-K, Form 10-Q, Form N-   A decrease of 2.0  This estimated burden
 CSR, Form 20-F.                 burden hours for   reduction reflects
                                 each affected      the elimination of
                                 form.              the monthly
                                                    aggregated
                                                    repurchase data.
------------------------------------------------------------------------

    We estimate that the new daily quantitative repurchase disclosure 
requirements will change the paperwork burden for filings on the 
affected periodic disclosure forms that include share repurchase 
disclosure. However, not all filings on the affected forms will include 
these disclosures because the disclosures are required only when an 
issuer conducts a share repurchase. Based on staff analysis of data 
from Compustat and EDGAR filings for fiscal year 2021,\545\ we estimate 
that the daily quantitative repurchase disclosure requirements in the 
final amendments will affect approximately 3,300 domestic corporate 
issuers, 300 FPIs, and 100 Listed Closed-End Funds.
---------------------------------------------------------------------------

    \545\ See supra Section V.A.1.
---------------------------------------------------------------------------

    Additionally, we note that most issuers that conduct share 
repurchases do so over a period of time, rather than by making a single 
purchase or a few isolated purchases during the year. Therefore, for 
purposes of this PRA analysis, we assume that the daily quantitative 
repurchase disclosures will be distributed evenly throughout an 
issuer's fiscal year. As a result, we estimate that, annually, the 
required daily quantitative repurchase disclosure will be included in 
one Form 10-K and three Form 10-Qs for each affected corporate issuer 
filing on domestic forms, four Form F-SRs for each affected FPI, and 
two Form N-CSRs for each affected Listed Closed-End Fund. Based on the 
staff's findings, the table below sets forth our estimates of the 
number of filings on these forms that include share repurchase 
disclosure.\546\
---------------------------------------------------------------------------

    \546\ We used this data to extrapolate the effect of these 
changes on the paperwork burden for the listed periodic reports. The 
OMB's PRA filing inventories represent a three-year average, which 
may not align with the actual number of filings in any given year.

                                                    PRA Table 2--Estimated Number of Affected Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Number of
                                     Number of                                     forms that      Number of      Increase in burden  Decrease in burden
                                      issuers                           Current     include       filings that      hours for daily     hours for daily
                                    affected by   Forms that include    annual       share       include share    quantitative share  quantitative share
            Issuer type                 the        share repurchase    responses   repurchase      repurchase         repurchase          repurchase
                                     repurchase       disclosure        in PRA     disclosure      disclosure       disclosures per     disclosures per
                                     disclosure                        inventory    annually   annually per form         form,               form
                                      annually                                     per issuer
                                            (A)  (B)................         (C)          (D)    (E) = (A) x (D)     (F) = (E) x 5.0     (G) = (E) x 2.0
                                                                                                                  [Forms 10-K, 10-Q,  [Forms 10-K, 10-Q,
                                                                                                                       N-CSR] or 6.0        20-F, N-CSR]
                                                                                                                         [Form F-SR]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporate Issuer Reporting on             3,300  10-K...............       8,292            1              3,300              16,500             (6,600)
 Domestic Forms.                                 10-Q...............      22,925            3              9,900              49,500            (19,800)
FPI...............................          300  F-SR...............           0            4              1,200               7,200
                                                 20-F...............         729            1                300                                   (600)
Registered Closed-End Fund........          100  N-CSR..............       6,898            2                200               1,000               (400)
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 36049]]

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
    As discussed in Section III.B.3., the modifications in the final 
amendments from the proposed amendments relating to the narrative 
disclosures in Item 703 of Regulation S-K and Form N-CSR are generally 
limited to clarifying certain aspects of the proposed amendments. 
Therefore, because the substantive requirements for those disclosures 
is the same, our PRA estimate is the same as the PRA estimate in the 
Proposing Release. As a result, we continue to estimate a burden of 3.0 
hours for each form for all the narrative disclosures in Item 703 of 
Regulation S-K and Form N-CSR. We estimate those 3.0 hours to consist 
of 0.5 hours for the checkbox and 2.5 hours for the remaining narrative 
disclosures.
    However, in a change from the proposal, the final amendments 
require FPIs to include one part of their narrative disclosures, the 
checkbox disclosure requirement, in Form F-SR, whereas the other three 
narrative disclosures will be in Form 20-F. Accordingly, we are 
estimating that the narrative disclosure burden for Form 20-F will be 
2.5 hours, consistent with the 2.5 hour narrative disclosure burden for 
corporate issuers filing on domestic forms and Listed Closed-End Funds 
without the burden for the checkbox. However, because Exchange Act 
section 16 does not apply to investors in FPIs and thus FPIs may not 
rely on Exchange Act section 16 filings, we believe FPIs will have a 
larger burden in collecting the information necessary to comply with 
the checkbox requirement than other issuers. Therefore, we are 
estimating the burden hours for the checkbox requirement for Form F-SR 
to be 1.0 hour, rather than 0.5 hours.
    Our estimate is for the average burden over the first three years 
of reporting.\547\ The following table summarizes the estimated 
paperwork burdens associated with the final amendments' required 
narrative disclosure for issuers of equity securities registered under 
section 12 of the Exchange Act in Forms 10-K, 10-Q, 20-F, N-CSR, and F-
SR.
---------------------------------------------------------------------------

    \547\ We acknowledge that final amendments may initially entail 
a higher burden as issuers get accustomed to collecting data for, 
and preparing, the form. We believe, however, that the burden will 
be reduced with subsequent filings.

     PRA Table 3--Estimated Paperwork Burden of the Narrative Share
  Repurchase Disclosures in Item 703 of Regulation S-K, Form 20-F, and
                               Form N-CSR
------------------------------------------------------------------------
                                 Estimated burden   Brief explanation of
        Affected forms               increase         estimated burden
------------------------------------------------------------------------
Form 10-K, Form 10-Q, Form N-   An increase of     This estimated burden
 CSR.                            3.0 burden hours   includes the
                                 for each           estimated 3.0-hour
                                 affected form.     burden for the
                                                    narrative share
                                                    repurchase
                                                    disclosures,
                                                    including the
                                                    checkbox
                                                    requirement, and the
                                                    use of structured
                                                    data for this
                                                    information.
Form 20-F.....................  An increase of     This estimated burden
                                 2.5 burden hours   includes the
                                 for each           estimated 2.5-hour
                                 affected form.     burden for the
                                                    narrative share
                                                    repurchase
                                                    disclosures, other
                                                    than the checkbox
                                                    requirement, and the
                                                    use of structured
                                                    data for this
                                                    information.
Form F-SR.....................  1.0 burden hour    This estimated burden
                                 for each           includes the
                                 affected form.     estimated 1.0-hour
                                                    burden for the
                                                    checkbox requirement
                                                    in the narrative
                                                    share repurchase
                                                    disclosures and the
                                                    use of structured
                                                    data for this
                                                    information.
------------------------------------------------------------------------

    We estimate that the new narrative disclosure requirements will 
increase the paperwork burden for filings on the affected periodic 
disclosure forms that include share repurchase disclosure. However, as 
we discussed above, not all filings on the affected forms will include 
these disclosures because the disclosures are required only when an 
issuer conducts a share repurchase. Additionally, as discussed above, 
we estimate that the narrative disclosure requirements in the final 
amendments will affect approximately 3,300 domestic corporate issuers, 
300 FPIs, and 100 Listed Closed-End Funds.
    Additionally, because most issuers that conduct share repurchases 
do so over time, rather than by making a single purchase or a few 
isolated purchases during the year, for purposes of this PRA analysis, 
we assume that the narrative disclosures will be distributed evenly 
throughout an issuer's fiscal year. As a result, we estimate that, 
annually, the required narrative disclosure will be included in one 
Form 10-K and three Form 10-Qs for each affected corporate issuer 
filing on domestic forms, four Form F-SRs and one Form 20-F for each 
affected FPI, and two Form N-CSRs for each affected Listed Closed-End 
Fund. Based on the staff's findings, the table below sets forth our 
estimates of the number of filings on these forms that will include 
share repurchase disclosure.\548\
---------------------------------------------------------------------------

    \548\ We used this data to extrapolate the effect of these 
changes on the paperwork burden for the listed periodic reports. The 
OMB's PRA filing inventories represent a three-year average, which 
may not align with the actual number of filings in any given year.

                                                                        PRA Table 4--Estimated Number of Affected Filings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Number of
                                                 Number of                                                forms that
                                                  issuers                                      Current     include    Number of filings     Burden hour        Burden hour        Burden hour
                                                affected by     Forms that include share       annual       share        that include       increase for       increase for       increase for
                  Issuer type                       the           repurchase disclosure       responses   repurchase   share repurchase   narrative share    narrative share    narrative share
                                                 repurchase                                    in PRA     disclosure      disclosure         repurchase         repurchase         repurchase
                                                 disclosure                                   inventory    annually   annually per form     disclosures        disclosures        disclosures
                                                  annually                                                per issuer
                                                        (A)  (B)...........................         (C)          (D)    (E) = (A) x (D)    (F) = (E) x 3.0    (G) = (E) x 2.5    (H) = (E) x 1.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Corporate Issuer Reporting on Domestic Forms..        3,300  10-K..........................       8,292            1              3,300              9,900
                                                             10-Q..........................      22,925            3              9,900             29,700
FPI...........................................          300  20-F..........................         729            1                300                                   750
                                                             F-SR..........................           0            4              1,200                                                    1,200

[[Page 36050]]

 
Listed Closed-End Fund........................          100  N-CSR.........................       6,898            2                200                600
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3. Estimated Paperwork Burdens of New Item 408(d)
    New Item 408(d) requires disclosure with respect to an issuer's 
adoption or termination of a contract, instruction, or written plan to 
purchase or sell its own securities that is intended to satisfy the 
affirmative defenses conditions of Rule 10b5-1(c). The final amendments 
do not require issuers to disclose information about the adoption or 
termination of any trading arrangement for the purchase or sale of the 
issuer's securities that meets the requirements of a non-Rule 10b5-1 
trading arrangement, nor do the final amendments require issuers to 
disclose pricing terms. We estimate a three-hour disclosure burden with 
respect to the issuer's adoption or termination of a contract, 
instruction, or written plan to purchase or sell its own securities 
that is intended to satisfy the affirmative defenses conditions of Rule 
10b5-1(c).\549\ Our estimate is for the average burden over the first 
three years of reporting.
---------------------------------------------------------------------------

    \549\ In the Rule 10b5-1 Proposing Release, see supra note 17, 
the Commission estimated that the average incremental burden for an 
issuer to prepare the proposed Item 408(a) disclosure would be 15 
hours. However, in the Rule 10b5-1 Adopting Release, see supra note 
18, the Commission modified Item 408(a) so that the final rule does 
not require disclosure of pricing terms or quarterly disclosure 
regarding an issuer's adoption and termination of Rule 10b5-1 plans 
and non-Rule 10b5-1 trading arrangements. As a result, the 
Commission reduced the estimated PRA burden for Item 408(a) 
disclosure by five hours, because it estimated a two-hour burden of 
disclosing the pricing terms and a three-hour burden of preparing 
the proposed disclosure regarding the adoption and termination of 
Rule 10b5-1 and non-Rule 10b5-1 trading arrangements by issuers.
---------------------------------------------------------------------------

    The following table summarizes the estimated paperwork burdens 
associated with the final amendments' required Item 408(d) disclosures 
for issuers in Forms 10-K and 10-Q.

       PRA Table 5--Estimated Paperwork Burden of New Item 408(d)
------------------------------------------------------------------------
                                                    Brief explanation of
        Affected forms           Estimated burden     estimated burden
                                     increase             increase
------------------------------------------------------------------------
Form 10-K, Form 10-Q..........  An increase of     This estimated burden
                                 3.0 burden hours   includes the
                                 for each of the    estimated 3.0-hour
                                 affected forms.    burden for the
                                                    required disclosure
                                                    of an issuer's
                                                    adoption or
                                                    termination of any
                                                    contract,
                                                    instruction, or
                                                    written plan for the
                                                    purchase or sale of
                                                    securities intended
                                                    to satisfy the
                                                    affirmative defense
                                                    conditions of Rule
                                                    10b5-1(c) and
                                                    require the use of
                                                    structured data for
                                                    this information.
------------------------------------------------------------------------

    We estimate that the new Item 408(d) disclosure will increase the 
current paperwork burden for filings on the affected forms. However, as 
we discussed above, not all filings on the affected forms will include 
these disclosures because the disclosures are required only when an 
issuer adopts or terminates a contract, instruction, or written plan to 
purchase or sell its own securities that is intended to satisfy the 
affirmative defenses conditions of Rule 10b5-1(c). As noted in Section 
V.A.1, an indirect approach to estimating the number of affected 
issuers involves extrapolating the number of companies conducting 
repurchases under Rule 10b5-1 plans in a given year from a combination 
of the incidence of Rule 10b5-1 plan use among voluntarily announced 
repurchases (estimated at 29 percent as previously noted) \550\ and the 
overall number of companies conducting repurchases based on their 
financial statements.\551\ Based on data from Compustat and EDGAR 
filings for fiscal years ending between January 1, 2021, and December 
31, 2021, we estimate that approximately 3,600 operating companies 
conducted repurchases, yielding an estimate of approximately 1,000 
companies affected by the Item 408(d) amendments.\552\
---------------------------------------------------------------------------

    \550\ See supra note 378.
    \551\ Using the number of issuers that announce repurchases in a 
given year would underestimate the number significantly because 
issuers may continue to implement a previously announced repurchase 
program over multiple years.
    \552\ Item 408(d) does not apply to FPIs filing on FPI forms or 
Listed Closed-End Funds.
---------------------------------------------------------------------------

    Additionally, because most issuers adopt or terminate a Rule 10b5-1 
trading plan throughout the year, rather than adopting or terminating a 
single Rule 10b5-1 trading plan during the year, for purposes of this 
PRA analysis, we assume that each issuer will enter, adopt or terminate 
Rule 10b5-1 trading plans evenly throughout the year. As a result, we 
estimate that, annually, the new Item 408(d) disclosure will be 
included in one Form 10-K and three Form 10-Qs. Based on the staff's 
findings, the table below sets forth our estimates of the number of 
filings on Forms 10-K and 10-Q that will be affected by new Item 
408(d).\553\
---------------------------------------------------------------------------

    \553\ We used this data to extrapolate the effect of these 
changes on the paperwork burden for the listed periodic reports. The 
OMB's PRA filing inventories represent a three-year average, which 
may not align with the actual number of filings in any given year.
---------------------------------------------------------------------------

[[Page 36051]]

                                          PRA Table 6--Estimated Number of Affected Filings for New Item 408(d)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Number of
                                                Number of                                               forms that
                                                 issuers                                     Current     include    Number of filings     Burden hour
                                               affected by     Forms that include share      annual       share        that include     increase for new
                 Issuer type                       the          repurchase disclosure       responses   repurchase   share repurchase     item 408(d)
                                                repurchase                                   in PRA     disclosure      disclosure        disclosures
                                                disclosure                                  inventory    annually   annually per form
                                                 annually                                               per issuer
                                                       (A)  (B)..........................         (C)          (D)    (E) = (A) x (D)    (F) = (E) x 3.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporate Issuer Reporting on Domestic Forms.        1,000  10-K.........................       8,292            1              1,000              3,000
                                                            10-Q.........................      22,925            3              3,000              9,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Incremental and Aggregate Burden and Cost Estimates

    Below we estimate the incremental and aggregate changes in 
paperwork burden as a result of the final amendments. These estimates 
represent the average burden for all issuers, both large and small. In 
deriving our estimates, we recognize that the burdens will likely vary 
among individual issuers. The final amendments will create a new 
required collection of information and change the burden per response 
of existing collections of information.
    We calculated the burden estimates by multiplying the estimated 
number of responses by the estimated average amount of time it would 
take an issuer to prepare and review disclosure required under the 
final amendments. For purposes of the PRA, the burden is to be 
allocated between internal burden hours and outside professional costs. 
The table below sets forth the percentage estimates we typically use 
for the burden allocation for each collection of information and the 
estimated burden allocation for the new collection of information. We 
also estimate that the average cost of retaining outside professionals 
is $600 per hour.\554\
---------------------------------------------------------------------------

    \554\ We recognize that the costs of retaining outside 
professionals may vary depending on the nature of the professional 
services, but for purposes of this PRA analysis, we estimate that 
such costs would be an average of $600 per hour. At the proposing 
stage, we used an estimated cost of $400 per hour. We are increasing 
this cost estimate to $600 per hour to adjust the estimate for 
inflation from August 2006.

PRA Table 7--Estimated Burden Allocation for the Affected Collections of
                               Information
------------------------------------------------------------------------
                                                             Outside
       Collection of information          Internal (%)    professionals
                                                               (%)
------------------------------------------------------------------------
Forms 10-K, 10-Q, and N-CSR............              75               25
Forms 20-F and F-SR....................              25               75
------------------------------------------------------------------------

    The table below illustrates the incremental change to the total 
annual compliance burden of affected forms, in hours and in costs, as a 
result of the final amendments' estimated effect on the paperwork 
burden per response.

             PRA Table 8--Calculation of the Incremental Change in Burden Estimates of Current Responses Resulting From the Final Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Total
                                                           incremental                                      Change in outside         Change in outside
               Collection of information                   increase in      Change in company hours         professional hours       professional costs
                                                           burden hours
                                                                 (A) \a\     (B) = (A) x 0.75 or 0.25     (C) = (A) x 0.25 or 0.75      (D) = (C) x $600
--------------------------------------------------------------------------------------------------------------------------------------------------------
10-K...................................................           22,800                       17,100                        5,700            $3,420,000
10-Q...................................................           68,400                       51,300                       17,100            10,260,000
20-F...................................................              150                         37.5                        112.5                67,500
N-CSR..................................................            1,200                          900                          300               180,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Sum of columns (F), (G), or (H) in Tables 2, 4, and 6 for each affected form.

[[Page 36052]]

    The following tables summarize the requested paperwork burden, 
including the estimated total reporting burdens and costs, under the 
final amendments.

                                                            PRA Table 9--Requested Paperwork Burden Under the Final Amendments \555\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Current burden                              Program change                        Requested change in burden
                                                           -------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Change in
                           Form                               Current    Current burden  Current outside   Number of    Change in       outside       Current                        Outside
                                                               annual         hours        professional     affected     company     professional      annual     Burden hours     professional
                                                             responses                     cost burden     responses      hours          costs       responses                     cost burden
                                                                    (A)             (B)              (C)          (D)      (E) \a\         (F) \b\      (G) \c\     (H) = (B) +  (I) = (C) + (F)
                                                                                                                                                                            (E)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Form 10-K.................................................        8,292      13,988,770   $1,835,588,919        3,300       17,100      $3,420,000        8,292      14,005,870   $1,839,008,919
Form 10-Q.................................................       22,925       3,098,084      410,257,154        9,900       51,300      10,260,000       22,925       3,149,384      420,517,154
Form 20-F.................................................          729         478,983      576,490,625          300           38          67,500          729         479,021      576,558,125
Form N-CSR................................................       23,680         227,137        5,949,524          200          900         180,000       23,680         228,037        6,129,524
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ From column (B) in Table 8.
\b\ From column (D) in Table 8.
\c\ From column (A).

    The below summarizes the requested paperwork burden for the new 
Form F-SR collection of information, including the estimated total 
reporting burdens and costs, under the final amendments as described in 
Section III.A. For purposes of the PRA, we estimate that new Form F-SR 
will entail a 6.5-hour compliance burden per response with 1,200 annual 
responses.

                 PRA Table 10--Requested Paperwork Burden for the New Collection of Information
----------------------------------------------------------------------------------------------------------------
                                                            Requested paperwork burden
   Collection of information    --------------------------------------------------------------------------------
                                   Annual responses         Burden hours        Outside professional cost burden
                                            (A) \a\    (A) x 7.0 x (0.25) \b\     (A) x 7.0 x (0.75) x $600 \c\
----------------------------------------------------------------------------------------------------------------
Form F-SR......................               1,200                     2,100                        $3,780,000
----------------------------------------------------------------------------------------------------------------
\a\ From column (E) in Tables 2 and 4.

VII. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``FRFA'') has been 
prepared in accordance with the Regulatory Flexibility Act 
(``RFA'').\556\ It relates to the final amendments to the rules and 
forms described in Section III above.
---------------------------------------------------------------------------

    \555\ Figures in this table are rounded to the nearest whole 
number.
    \556\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

A. Need for, and Objectives of, the Final Amendments

    The final amendments modernize and improve disclosure about 
repurchases of an issuer's equity securities that are registered under 
section 12 of the Exchange Act. 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 purchases. Finally, the amendments 
add new quarterly disclosure in certain periodic reports related to an 
issuer's adoption and termination of certain trading arrangements.
    The reasons for, and objectives of, the final amendments are 
discussed in more detail in Sections I, II, and III above. We discuss 
the economic impact and potential alternatives to the amendments in 
Section V, and the estimated compliance costs and burdens of the 
amendments under the PRA in Section VI above.

B. Significant Issues Raised by Public Comments

    In the Proposing Release \557\ and the Rule 10b5-1 Proposing 
Release,\558\ the Commission requested comment on any aspect of the 
Initial Regulatory Flexibility Analysis (``IRFA''), including the 
number of small entities that would be affected by the proposed 
amendments, the existence or nature of the potential impact of the 
proposed amendments on small entities discussed in the analysis, how 
the proposed amendments could further lower the burden on small 
entities, and how to quantify the impact of the proposed amendments. We 
did not receive any comments that specifically addressed the IRFA. 
However, some commenters addressed aspects of the proposals that could 
potentially affect small entities.
---------------------------------------------------------------------------

    \557\ See supra note 2.
    \558\ See supra note 17.
---------------------------------------------------------------------------

    In particular, two commenters asserted that the proposed amendments 
would increase the burdens on smaller issuers,\559\ and another 
commenter indicated its concern that the proposed amendments would 
induce issuers to use larger financial services firms over smaller 
ones.\560\ Several commenters

[[Page 36053]]

did not support exempting smaller issuers from the proposed 
amendments,\561\ but some of these commenters suggested providing small 
issuers with more time to provide the daily quantitative repurchase 
disclosures.\562\ Additionally, one commenter on the Rule 10b5-1 
Proposing Release supported exempting SRCs from proposed Item 408(a), 
which we are adopting as new Item 408(d).\563\ For the reasons 
discussed in further detail above,\564\ we have not adopted any 
exemption for small entities.
---------------------------------------------------------------------------

    \559\ See letters from ACCO (``Regarding the Commission's 
Buyback Proposal, we find the real-time disclosure and incremental 
detail of Form SR to be onerous and unnecessary, but we would 
support similar enhanced disclosure to be reported in line with XBRL 
as part of the normal periodic reporting process. We don't view the 
proposed additional frequency and details as benefiting investors, 
while the burden (including the costs of compliance) placed on 
smaller public companies like ours would be significant.'') and 
Profs. Lewis and White (``Although small issuers likely conduct 
fewer repurchases than larger ones, they do repurchase their own 
shares periodically to offset equity dilution from compensation 
plans or to alter their capital structure. By nature of their size, 
small issuers incur disproportionate relative compliance costs.'').
    \560\ See letter from Guzman (``[T]he new rules would have the 
collateral damage of likely decreasing competition in the investment 
banking industry, shifting business away from smaller firms to large 
bulge bracket investment banks. This collateral effect would be 
driven by the erroneous perception that larger firms are better able 
to cope with the additional reporting requirements. While this 
concern is absolutely without basis in our case, it is a perception 
that may be common among risk-averse corporate treasuries. Multiple 
companies have told us that they believe larger institutions would 
be better equipped to (1) handle the additional compliance 
requirements and (2) better protect them from potential front-
running trading that is likely to be created if their repurchase 
activity is reported daily.'').
    \561\ See, e.g., letters from Better Markets I, BrilLiquid, CFA 
Institute, Cravath, Hecht, and ICGN.
    \562\ See, e.g., letters from Cravath and Hecht.
    \563\ See letter in response to the Rule 10b5-1 Proposing 
Release from Maryland Bar.
    \564\ See Sections III.B.3 and III.C.3.
---------------------------------------------------------------------------

C. Small Entities Subject to the Final Amendments

    The final amendments would affect some issuers that are small 
entities. The RFA defines ``small entity'' to mean ``small business,'' 
``small organization,'' or ``small governmental jurisdiction.'' \565\ 
For purposes of the RFA, under our rules, an issuer, other than an 
investment company, is a ``small business'' or ``small organization'' 
if it had total assets of $5 million or less on the last day of its 
most recent fiscal year and is engaged or proposing to engage in an 
offering of securities not exceeding $5 million.\566\ An investment 
company, including a business development company,\567\ is considered 
to be a ``small business'' or ``small organization'' if it, together 
with other investment companies in the same group of related investment 
companies, has net assets of $50 million or less as of the end of its 
most recent fiscal year.\568\
---------------------------------------------------------------------------

    \565\ 5 U.S.C. 601(6).
    \566\ See 17 CFR 240.0-10(a).
    \567\ Business development companies are a category of closed-
end investment company that are not registered under the Investment 
Company Act. See 15 U.S.C. 80a-2(a)(48) and 80a-53-64.
    \568\ 17 CFR 270.0-10(a).
---------------------------------------------------------------------------

    Commission staff estimates that there are approximately 780 issuers 
with a class of securities registered under section 12 of the Exchange 
Act that file with the Commission (other than investment 
companies),\569\ 23 Listed Closed-End Funds,\570\ and nine business 
development companies \571\ that may be considered small entities and 
are potentially subject to the final amendments other than new Item 
408(d). Commission staff also estimates that, as of January 2022, there 
were approximately 1,380 issuers and two business development companies 
that may be considered small entities that would be subject to new Item 
408(d).\572\
---------------------------------------------------------------------------

    \569\ This estimate is based on staff analysis of issuers, 
excluding co-registrants, subsidiaries, investment companies, or 
asset-backed securities, with EDGAR filings of Form 10-K and 20-F, 
or amendments thereto, filed during the calendar year of January 1, 
2021, to December 31, 2021. Analysis is based on data from XBRL 
filings, Compustat, Ives Group Audit Analytics, and manual review of 
filings submitted to the Commission.
    \570\ This estimate is derived from an analysis of data obtained 
from Morningstar Direct as well as data reported to the Commission 
for the period ending June 2021.
    \571\ Id.
    \572\ This estimate is based on staff analysis of Form 10-K 
filings on EDGAR, or amendments thereto, filed during the calendar 
year of Jan. 1, 2021, to Dec. 31, 2021, and on data from XBRL 
filings, Compustat, and Ives Group Audit Analytics. The staff noted 
that the estimated number of small entities includes approximately 
344 entities that are special purpose acquisition companies 
(``SPACs''). A SPAC is typically a shell company that is organized 
for the purpose of merging with or acquiring one or more 
unidentified private operating companies within a certain time 
frame. Some of these small entities that are SPACs are unlikely to 
remain small entities once the SPAC has completed its initial 
business combination and becomes an operating company.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The final amendments apply to small entities to the same extent as 
other entities, irrespective of size. As noted in Section VI.D. above, 
while we acknowledge that smaller entities are more likely to be 
affected by the costs of additional disclosure, smaller entities are 
also less likely to have share repurchases, which would limit the 
incremental burden of additional reporting under the final 
amendments.\573\ In addition, while we expect larger Listed Closed-End 
Funds and business development companies (``funds''), or funds that are 
part of a large fund complex, to incur higher costs related to final 
amendments in absolute terms relative to a smaller fund or a fund that 
is part of a smaller fund complex, we expect a smaller fund to find it 
more costly, per dollar managed, to comply with the final amendments 
because it would not be able to benefit from a larger fund complex's 
economies of scale.
---------------------------------------------------------------------------

    \573\ See supra Section V.D. In addition, in Section V.C. above 
we further note that to the extent that the final amendments affect 
small filers to a greater extent than large filers, they could 
result in adverse effects on competition.
---------------------------------------------------------------------------

    The final amendments require additional detail regarding the 
structure of an issuer's repurchase program and quantitative disclosure 
of its daily repurchase data that the issuer must tag using Inline 
XBRL. The final amendments are intended to modernize and improve 
disclosure about repurchases of an issuer's equity securities that are 
registered under section 12 of the Exchange Act. More specifically, 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
     FPIs reporting on the FPI forms to disclose daily 
quantitative repurchase data at the end of every quarter in the new 
Form F-SR, which will be due 45 days after the end of an FPI's fiscal 
quarter.
    Additionally, the final amendments require an issuer to include a 
checkbox above its tabular disclosures indicating whether its officers 
and directors subject to the Exchange Act section 16(a) reporting 
requirements (for domestic corporate issuers and Listed Closed-End 
Funds) or its directors and members of senior management who would be 
identified pursuant to Item 1 of Form 20-F (for FPIs) purchased or sold 
shares or other units of the class of the issuer's equity securities 
that are registered pursuant to section 12 of the Exchange Act and 
subject of a publicly announced plan or program within four (4) 
business days before or after the issuer's announcement of such 
repurchase plan or program or the announcement of an increase of an 
existing share repurchase plan or program. 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.
    Additionally, 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;
     Any policies and procedures relating to purchases and 
sales of the issuer's securities during a repurchase program by the 
officers and directors, including any restriction on such transactions; 
and
     Whether it made its repurchases 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/or 
whether its repurchases were intended to qualify for

[[Page 36054]]

the Rule 10b-18 non-exclusive safe harbor.
    The final amendments also include 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.
    We anticipate that the direct costs of preparing disclosures in 
response to the final amendments will likely be relatively small as 
repurchase information will be readily available to issuers, including 
small entities, because they are already required to provide repurchase 
disclosures under existing rules. Additionally, to the extent that the 
final requirements have a greater effect on small filers relative to 
large filers, they could result in adverse effects on competition. The 
fixed component of the legal costs of preparing the disclosure could be 
one contributing factor. Compliance with certain provisions of the 
final amendments may require the use of professional skills, including 
accounting, legal, and technical skills.\574\ The final amendments are 
discussed in detail in Sections I, II, and III above. We discuss the 
economic impact, including the estimated compliance costs and burdens 
of the final rules on all issuers, including small entities, in 
Sections V and VI above.
---------------------------------------------------------------------------

    \574\ See supra Section III.
---------------------------------------------------------------------------

E. Agency Action To Minimize Effect on Small Entities

    The RFA directs us to consider alternatives that would accomplish 
our stated objectives, while minimizing any significant adverse impact 
on small entities. In connection with the amendments, we considered the 
following alternatives:
     Establishing different compliance or reporting 
requirements or timetables that take into account the resources 
available to small entities;
     Clarifying, consolidating, or simplifying compliance and 
reporting requirements under the rules for small entities;
     Using performance rather than design standards; and
     Exempting small entities from all or part of the 
requirements.\575\
---------------------------------------------------------------------------

    \575\ See supra Section III.
---------------------------------------------------------------------------

    The final amendments are intended to improve disclosure about 
repurchases of an issuer's equity securities for investors to evaluate 
those activities and decrease information asymmetry between issuers and 
investors. The additional disclosure, which will be provided in a 
machine-readable format, should permit investors to more quickly and 
efficiently evaluate information relating to issuer share repurchases, 
on a more granular basis. Moreover, any burdens associated with 
interactive data associated with the final amendments are estimated to 
be negligible.\576\
---------------------------------------------------------------------------

    \576\ See supra note 540.
---------------------------------------------------------------------------

    With respect to using performance rather than design standards, the 
final amendments use design standards to promote uniform compliance 
requirements for all registrants and to address the concerns underlying 
the amendments, which apply to entities of all size. For example, the 
final amendments set forth specific disclosure requirements an issuer 
must satisfy in providing its daily quantitative disclosure 
information. These design standards will better ensure that investors 
will be provided 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.
    The final amendments do not provide an exemption or otherwise 
establish a delayed compliance timetable for small entities. We note, 
however, that small entities (and other issuers) are already required 
to provide repurchase disclosures under existing rules. Moreover, while 
we acknowledge that small entities are more likely to be affected by 
the costs of additional disclosure, all else equal (holding constant 
the disclosure burden), small entities are less likely to have share 
repurchases,\577\ which would limit the incremental burden of 
additional reporting under the final amendments for each small entity. 
Further, to the extent that small entities have relatively high 
information asymmetries because of lower analyst and institutional 
coverage, the additional disclosure about their repurchases may be 
relatively more informative to investors. The final amendments do, 
however, simplify and consolidate reporting for small entities (and 
other issuers) by requiring quarterly and semi-annual reporting of 
daily quantitative repurchase data instead of daily reporting of such 
data, as proposed.
---------------------------------------------------------------------------

    \577\ See supra Section V.D.
---------------------------------------------------------------------------

Statutory Authority

    The amendments contained in this release are being adopted under 
the authority set forth in sections 12, 13, 15, and 23(a) of the 
Exchange Act, and sections 8, 23, 24(a), 30, 31, and 38 of the 
Investment Company Act.

List of Subjects in 17 CFR Parts 229, 232, 240, 249, and 274

    Reporting and record keeping requirements, Securities.

    For the reasons set forth in the preamble, the Commission is 
amending title 17, chapter II of the Code of Federal Regulations as 
follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read as follows:

    Authority:  15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78 mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C. 
1350; sec. 953(b), Pub. L. 111-203, 124 Stat. 1904 (2010); and sec. 
102(c), Pub. L. 112-106, 126 Stat. 310 (2012).

0
2. Amend Sec.  229.408 by adding paragraph (d) to read as follows:

Sec.  229.408  (Item 408) Insider trading arrangements and policies.

* * * * *
    (d)(1) Disclose whether, during the registrant's last fiscal 
quarter (the registrant's fourth fiscal quarter in the case of an 
annual report), the registrant adopted or terminated any Rule 10b5-1 
trading arrangement as that term is defined in paragraph (a)(1)(i) of 
this section. In addition, provide a description of the material terms 
of the Rule 10b5-1 trading arrangement (other than terms with respect 
to the price at which the party executing the Rule 10b5-1 trading 
arrangement is authorized to trade), such as:
    (i) The date on which the registrant adopted or terminated the Rule 
10b5-1 trading arrangement;
    (ii) The duration of the Rule 10b5-1 trading arrangement; and
    (iii) The aggregate number of securities to be purchased or sold 
pursuant to the Rule 10b5-1 trading arrangement.

    Note 1 to paragraph (d)(1): If the disclosure provided pursuant 
to Sec.  229.703 contains disclosure that would satisfy the 
requirements of paragraph (d)(1) of this section, a cross-reference 
to that disclosure will also satisfy the requirements of

[[Page 36055]]

paragraph (d)(1). (2) The disclosure provided pursuant to paragraph 
(d)(1) of this section must be provided in an Interactive Data File 
as required by Sec.  232.405 of this chapter (Rule 405 of Regulation 
S-T) in accordance with the EDGAR Filer Manual.

0
3. Amend Sec.  229.601 by:
0
a. In the exhibit table in paragraph (a), adding entry 26; and
0
b. Adding paragraph (b)(26).
    The additions read as follows:

Sec.  229.601  (Item 601) Exhibits.

    (a) * * *

                                                                                          Exhibit Table
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Securities act forms                                                        Exchange act forms
                                           -----------------------------------------------------------------------------------------------------------------------------------------------------
                                              S-1     S-3     SF-1      SF-3     S-4 \1\    S-8     S-11     F-1     F-3    F-4 \1\    10    8-K \2\    10-D      10-Q      10-K       ABS-EE
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                                          * * * * * * *
(26) Purchases of equity securities by the  ......  ......  ........  ........  ........  ......  .......  ......  ......  ........  .....  ........  ........        X         X   ............
 issuer and affiliated purchasers.........
 
                                                                                          * * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ An exhibit need not be provided about a company if: (1) With respect to such company an election has been made under Form S-4 or F-4 to provide information about such company at a level
  prescribed by Form S-3 or F-3; and (2) the form, the level of which has been elected under Form S-4 or F-4, would not require such company to provide such exhibit if it were registering a
  primary offering.
\2\ A Form 8-K exhibit is required only if relevant to the subject matter reported on the Form 8-K report. For example, if the Form 8-K pertains to the departure of a director, only the
  exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated by reference from a previous filing.
 * * * * * * *

    (b) * * *
    (26) Purchases of equity securities by the issuer and affiliated 
purchasers. (i) Every issuer that has a class of equity securities 
registered pursuant to section 12 of the Exchange Act (15 U.S.C. 781) 
that files quarterly reports on Form 10-Q or an annual report on Form 
10-K must file, in the following tabular format, an exhibit to those 
reports disclosing, for the period covered by the report (or the 
issuer's fourth fiscal quarter, in the case of an annual report on Form 
10-K), the total purchases made each day by or on behalf of the issuer 
or any ``affiliated purchaser,'' as defined in Sec.  240.10b-18(a)(3) 
of this chapter, of shares or other units of any class of the issuer's 
equity securities that are registered by the issuer pursuant to section 
12 of the Exchange Act.
    (ii) The information provided pursuant to this paragraph (b)(26) 
must be provided in an Interactive Data File as required by Sec.  
232.405 of this chapter (Rule 405 of Regulation S-T) in accordance with 
the EDGAR Filer Manual.
    (iii) This paragraph (b)(26) shall not apply to an investment 
company registered under the Investment Company Act of 1940 (15 U.S.C. 
80a-1 et seq.).
    (iv) Disclose in the table:
    (A) The date, which is the date on which the purchase of shares (or 
units) is executed (column (a));
    (B) The class of shares (or units), which should clearly identify 
the class, even if the issuer has only one class of securities 
outstanding (column (b));
    (C) The total number of shares (or units) purchased on this date, 
which includes all shares (or units) purchased by or on behalf of the 
issuer or any affiliated purchaser, regardless of whether made pursuant 
to publicly announced repurchase plans or programs (column (c));
    (D) The average price paid per share (or unit), which shall be 
reported in U.S. dollars and exclude brokerage commissions and other 
costs of execution (column (d));
    (E) The total number of shares (or units) purchased on this date as 
part of publicly announced repurchase plans or programs (column (e));
    (F) The aggregate maximum number (or approximate dollar value) of 
shares (or units) that may yet be purchased under the publicly 
announced repurchase plans or programs (column (f));
    (G) Total number of shares (or units) purchased on this date on the 
open market, which includes all shares (or units) repurchased by the 
issuer in open-market transactions, and does not include shares (or 
units) purchased in tender offers, in satisfaction of the issuer's 
obligations upon exercise of outstanding put options issued by the 
issuer, or other transactions (column (g));
    (H) Total number of shares (or units) purchased on this date that 
are intended by the issuer to qualify for the safe harbor in Sec.  
240.10b-18 of this chapter (Rule 10b-18) (column (h)); and
    (I) Total number of shares (or units) purchased on this date 
pursuant to a plan that is intended by the issuer to satisfy the 
affirmative defense conditions of Sec.  240.10b5-1(c) of this chapter 
(Rule 10b5-1(c)) (column (i)).
    (v) Disclose, by footnote to the table, the date any plan that is 
intended to satisfy the affirmative defense conditions of Rule 10b5-
1(c) for the shares (or units) in column (i) was adopted or terminated.
    (vi) In determining whether to check the box under ``Issuer 
Purchases of Equity Securities,'' the issuer may rely on the following, 
unless the issuer knows or has reason to believe that a form was filed 
inappropriately or that a form should have been filed but was not:
    (A) A review of Forms 3 and 4 (Sec. Sec.  249.103 and 249.104 of 
this chapter) and amendments thereto filed electronically with the 
Commission during the issuer's most recent fiscal year;
    (B) A review of Form 5 (Sec.  249.105 of this chapter) and 
amendments thereto filed electronically with the Commission with 
respect to the issuer's most recent fiscal year;
    (C) Any written representation from the reporting person that no 
Form 5 is required. The issuer must maintain the representation in its 
records for two years, making a copy available to the Commission or its 
staff upon request; and
    (D) For foreign private issuers, any written representations from 
the directors and senior management who would be identified pursuant to 
Item 1 of Form 20-F, provided that the reliance is reasonable. The 
issuer must maintain the representation in its records for two years, 
making a copy available to the Commission or its staff upon request.
BILLING CODE 8011-01-P

[[Page 36056]]

Figure 1 to Paragraph (b)(26)--Issuer Purchases of Equity Securities 
(Tabular Format)
[GRAPHIC] [TIFF OMITTED] TR01JN23.000

BILLING CODE 8011-01-C
* * * * *

0
4. Revise Sec.  229.703 to read as follows:

Sec.  229.703  (Item 703) Purchases of equity securities by the issuer 
and affiliated purchasers.

    (a) Disclose the specified information in narrative form with 
respect to the issuer's repurchases of equity securities disclosed 
pursuant to Sec.  229.601(b)(26) (Item 601(b)(26) of Regulation S-K) 
and refer to the particular repurchases in the table in Item 601(b)(26) 
of Regulation S-K that correspond to the different parts of the 
narrative, if applicable:
    (1) The objectives or rationales for each repurchase plan or 
program and the process or criteria used to determine the amount of 
repurchases.
    (2) The number of shares (or units) purchased other than through a 
publicly announced plan or program, and the nature of the transaction 
(e.g., whether the purchases were made in open-market transactions, 
tender offers, in satisfaction of the issuer's obligations upon 
exercise of outstanding put options issued by the issuer, or other 
transactions).
    (3) For publicly announced repurchase plans or programs:
    (i) The date each plan or program was announced;
    (ii) The dollar amount (or share or unit amount) approved;
    (iii) The expiration date (if any) of each plan or program;
    (iv) Each plan or program that has expired during the period 
covered by the table in Item 601(b)(26) of Regulation S-K; and

[[Page 36057]]

    (v) 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.
    (4) 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 restrictions on such transactions.
    (b) The disclosure provided pursuant to paragraph (a) of this 
section must be provided in an Interactive Data File as required by 
Sec.  232.405 of this chapter (Rule 405 of Regulation S-T) in 
accordance with the EDGAR Filer Manual.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
5. The general authority citation for part 232 continues to read as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c), 
80a-8, 80a-29, 80a-30, 80a-37, 80b-4, 80b-6a, 80b-10, 80b-11, 7201 
et seq.; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *

0
6. Amend Sec.  232.405 by:
0
a. Revising the introductory text and paragraphs (a)(2) and (4) and 
(b)(4)(iii);
0
b. Adding paragraph (b)(4)(iv); and
0
c. Revising Note 1 to Sec.  232.405.
    The revisions and addition read as follows:

Sec.  232.405  Interactive Data File submissions.

    This section applies to electronic filers that submit Interactive 
Data Files. Section 229.601(b)(101) of this chapter (Item 601(b)(101) 
of Regulation S-K), General Instruction F of Form 11-K (Sec.  249.311 
of this chapter); paragraph (101) of Part II--Information Not Required 
to be Delivered to Offerees or Purchasers of Form F-10 (Sec.  239.40 of 
this chapter), Sec.  240.13a-21 of this chapter (Rule 13a-21 under the 
Exchange Act), paragraph 101 of the Instructions as to Exhibits of Form 
20-F (Sec.  249.220f of this chapter), paragraph B.(15) of the General 
Instructions to Form 40-F (Sec.  249.240f of this chapter), paragraph 
C.(6) of the General Instructions to Form 6-K (Sec.  249.306 of this 
chapter), Sec.  240.17Ad-27(d) of this chapter (Rule 17Ad-27(d) under 
the Exchange Act), Note D.5 of Sec.  240.14a-101 of this chapter (Rule 
14a-101 under the Exchange Act), Item 1 of Sec.  240.14c-101 of this 
chapter (Rule 14c-101 under the Exchange Act), General Instruction I of 
Form F-SR (Sec.  249.333 of this chapter), General Instruction C.3.(g) 
of Form N-1A (Sec. Sec.  239.15A and 274.11A of this chapter), General 
Instruction I of Form N-2 (Sec. Sec.  239.14 and 274.11a-1 of this 
chapter), General Instruction C.3.(h) of Form N-3 (Sec. Sec.  239.17a 
and 274.11b of this chapter), General Instruction C.3.(h) of Form N-4 
(Sec. Sec.  239.17b and 274.11c of this chapter), General Instruction 
C.3.(h) of Form N-6 (Sec. Sec.  239.17c and 274.11d of this chapter), 
and General Instruction C.4 of Form N-CSR (Sec. Sec.  249.331 and 
274.128 of this chapter) specify when electronic filers are required or 
permitted to submit an Interactive Data File (Sec.  232.11), as further 
described in note 1 to this section. This section imposes content, 
format, and submission requirements for an Interactive Data File, but 
does not change the substantive content requirements for the financial 
and other disclosures in the Related Official Filing (Sec.  232.11).
    (a) * * *
    (2) Be submitted only by an electronic filer either required or 
permitted to submit an Interactive Data File as specified by Item 
601(b)(101) of Regulation S-K, General Instruction F of Form 11-K 
(Sec.  249.311 of this chapter); paragraph (101) of Part II--
Information Not Required to be Delivered to Offerees or Purchasers of 
Form F-10 (Sec.  239.40 of this chapter), Sec.  240.13a-21 of this 
chapter (Rule 13a-21 under the Exchange Act), paragraph 101 of the 
Instructions as to Exhibits of Form 20-F (Sec.  249.220f of this 
chapter), paragraph B.(15) of the General Instructions to Form 40-F 
(Sec.  249.240f of this chapter), paragraph C.(6) of the General 
Instructions to Form 6-K (Sec.  249.306 of this chapter), Rule 17Ad-
27(d) under the Exchange Act, Note D.5 of Rule 14a-101 under the 
Exchange Act, Item 1 of Rule 14c-101 under the Exchange Act, General 
Instruction I to Form F-SR (Sec.  249.333 of this chapter), General 
Instruction C.3.(g) of Form N-1A (Sec. Sec.  239.15A and 274.11A of 
this chapter), General Instruction I of Form N-2 (Sec. Sec.  239.14 and 
274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3 
(Sec. Sec.  239.17a and 274.11b of this chapter), General Instruction 
C.3.(h) of Form N-4 (Sec. Sec.  239.17b and 274.11c of this chapter), 
General Instruction C.3.(h) of Form N-6 (Sec. Sec.  239.17c and 274.11d 
of this chapter), or General Instruction C.4 of Form N-CSR (Sec. Sec.  
249.331 and 274.128 of this chapter), as applicable;
* * * * *
    (4) Be submitted in accordance with the EDGAR Filer Manual and, as 
applicable, Item 601(b)(101) of Regulation S-K, General Instruction F 
of Form 11-K (Sec.  249.311 of this chapter), paragraph (101) of Part 
II--Information Not Required to be Delivered to Offerees or Purchasers 
of Form F-10 (Sec.  239.40 of this chapter), Rule 13a-21 under the 
Exchange Act, paragraph 101 of the Instructions as to Exhibits of Form 
20-F (Sec.  249.220f of this chapter), paragraph B.(15) of the General 
Instructions to Form 40-F (Sec.  249.240f of this chapter), paragraph 
C.(6) of the General Instructions to Form 6-K (Sec.  249.306 of this 
chapter), Rule 17Ad-27(d) under the Exchange Act, Note D.5 of Rule 14a-
101 under the Exchange Act, Item 1 of Rule 14c-101 under the Exchange 
Act, General Instruction I to Form F-SR (Sec.  249.333 of this 
chapter), General Instruction C.3.(g) of Form N-1A (Sec. Sec.  239.15A 
and 274.11A of this chapter), General Instruction I of Form N-2 
(Sec. Sec.  239.14 and 274.11a-1 of this chapter), General Instruction 
C.3.(h) of Form N-3 (Sec. Sec.  239.17a and 274.11b of this chapter), 
General Instruction C.3.(h) of Form N-4 (Sec. Sec.  239.17b and 274.11c 
of this chapter), General Instruction C.3.(h) of Form N-6 (Sec. Sec.  
239.17c and 274.11d of this chapter); or General Instruction C.4 of 
Form N-CSR (Sec. Sec.  249.331 and 274.128 of this chapter).
    (b) * * *
    (4) * * *
    (iii) Any disclosure provided in response to: Sec.  229.402(x) of 
this chapter (Item 402(x) of Regulation S-K); Sec.  229.408(a)(1) and 
(2) of this chapter (Item 408(a)(1) and (2) of Regulation S-K); Sec.  
229.408(b)(1) of this chapter (Item 408(b)(1) of Regulation S-K); Sec.  
229.408(d) of this chapter (Item 408(d) of Regulation S-K); and Item 
16J(a) of Form 20-F (Sec.  249.220f of this chapter).
    (iv) Any disclosure provided in response to: Sec.  229.601(b)(26) 
of this chapter (Item 601(b)(26) of Regulation S-K); Sec.  229.703 of 
this chapter (Item 703 of Regulation S-K); Item 16E of Form 20-F (Sec.  
249.220f of this chapter); Item 14 of Form N-CSR (Sec. Sec.  249.331 
and 274.128 of this chapter); Rule 13a-21 under the Exchange Act; and 
General Instruction I to Form F-SR (Sec.  249.333 of this chapter).
* * * * *

    Note 1 to Sec.  232.405: Item 601(b)(101) of Regulation S-K 
specifies the circumstances under which an Interactive Data File 
must be submitted and the circumstances under which it is permitted 
to be submitted, with respect to Sec. Sec.  239.11 (Form S-1), 
239.13 (Form S-3), 239.25 (Form S-4), 239.18 (Form S-11), 239.31 
(Form F-1), 239.33 (Form F-3), 239.34 (Form F-4), 249.310 (Form 10-
K), 249.308a (Form 10-Q), and 249.308 (Form 8-K). General 
Instruction F of Form 11-K (Sec.  249.311 of this chapter) specifies 
the circumstances under which an Interactive Data File must be 
submitted, and the circumstances under which it is permitted to be 
submitted, with respect to Form 11-K. Paragraph (101) of Part II--
Information not

[[Page 36058]]

Required to be Delivered to Offerees or Purchasers of Form F-10 
(Sec.  239.40 of this chapter) specifies the circumstances under 
which an Interactive Data File must be submitted and the 
circumstances under which it is permitted to be submitted, with 
respect to Form F-10. Paragraph 101 of the Instructions as to 
Exhibits of Form 20-F (Sec.  249.220f of this chapter) specifies the 
circumstances under which an Interactive Data File must be submitted 
and the circumstances under which it is permitted to be submitted, 
with respect to Form 20-F. Paragraph B.(15) of the General 
Instructions to Form 40-F (Sec.  249.240f of this chapter) and 
Paragraph C.(6) of the General Instructions to Form 6-K (Sec.  
249.306 of this chapter) specify the circumstances under which an 
Interactive Data File must be submitted and the circumstances under 
which it is permitted to be submitted, with respect to Sec. Sec.  
249.240f (Form 40-F) and 249.306 of this chapter (Form 6-K). Rule 
17Ad-27(d) under the Exchange Act specifies the circumstances under 
which an Interactive Data File must be submitted with respect the 
reports required under Rule 17Ad-27. Note D.5 of Sec.  240.14a-101 
of this chapter (Schedule 14A) and Item 1 of Sec.  240.14c-101 of 
this chapter (Schedule 14C) specify the circumstances under which an 
Interactive Data File must be submitted with respect to Schedules 
14A and 14C. Rule 13a-21 under the Exchange Act and General 
Instruction I to Form F-SR (Sec.  249.333 of this chapter) specify 
the circumstances under which an Interactive Data File must be 
submitted, with respect to Form F-SR. Item 601(b)(101) of Regulation 
S-K, paragraph (101) of Part II--Information not Required to be 
Delivered to Offerees or Purchasers of Form F-10, paragraph 101 of 
the Instructions as to Exhibits of Form 20-F, paragraph B.(15) of 
the General Instructions to Form 40-F, and paragraph C.(6) of the 
General Instructions to Form 6-K all prohibit submission of an 
Interactive Data File by an issuer that prepares its financial 
statements in accordance with Sec. Sec.  210.6-01 through 210.6-10 
of this chapter (Article 6 of Regulation S-X). For an issuer that is 
a management investment company or separate account registered under 
the Investment Company Act of 1940 (15 U.S.C. 80a et seq.) or a 
business development company as defined in section 2(a)(48) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), General 
Instruction C.3.(g) of Form N-1A (Sec. Sec.  239.15A and 274.11A of 
this chapter), General Instruction I of Form N-2 (Sec. Sec.  239.14 
and 274.11a-1 of this chapter), General Instruction C.3.(h) of Form 
N-3 (Sec. Sec.  239.17a and 274.11b of this chapter), General 
Instruction C.3.(h) of Form N-4 (Sec. Sec.  239.17b and 274.11c of 
this chapter), General Instruction C.3.(h) of Form N-6 (Sec. Sec.  
239.17c and 274.11d of this chapter), and General Instruction C.4 of 
Form N-CSR (Sec. Sec.  249.331 and 274.128 of this chapter), as 
applicable, specifies the circumstances under which an Interactive 
Data File must be submitted.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
7. The general authority citation for part 240 continues to read as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 
78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 
78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et 
seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 
1350; and Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 
112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise 
noted.
* * * * *

0
8. Add Sec.  240.13a-21 to read as follows:

Sec.  240.13a-21  Purchases of equity securities by a foreign private 
issuer and affiliated purchasers.

    (a) Every foreign private issuer that has a class of equity 
securities registered pursuant to section 12 of the Act (15 U.S.C. 781) 
and that does not file quarterly reports on Form 10-Q (Sec.  249.308a 
of this chapter) and annual reports on Form 10-K (Sec.  249.310 of this 
chapter) must file a Form F-SR (Sec.  249.333 of this chapter) 
disclosing, for the period covered by the form and as specified by the 
form, the aggregate purchases during each day made by or on behalf of 
the issuer or any ``affiliated purchaser,'' as defined in Sec.  
240.10b-18(a)(3), of shares or other units of any class of the issuer's 
equity securities that is registered by the issuer pursuant to section 
12 of the Act, within the time period specified in General Instruction 
I to Form F-SR. The information provided pursuant to the form must be 
provided in an Interactive Data File as required by Sec.  232.405 of 
this chapter (Rule 405 of Regulation S-T) in accordance with the EDGAR 
Filer Manual.
    (b) Paragraph (a) of this section shall not apply to an investment 
company registered under the Investment Company Act of 1940 (15 U.S.C. 
80a-1 et. seq.).

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
9. The authority citation for part 249 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b) Pub. L. 111-203, 124 Stat. 
1904; Sec. 102(a)(3) Pub. L. 112-106, 126 Stat. 309 (2012), Sec. 107 
Pub. L. 112-106, 126 Stat. 313 (2012), Sec. 72001 Pub. L. 114-94, 
129 Stat. 1312 (2015), and secs. 2 and 3 Pub. L. 116-222, 134 Stat. 
1063 (2020), unless otherwise noted.

    Section 249.220f is also issued under secs. 3(a), 202, 208, 302, 
306(a), 401(a), 401(b), 406 and 407, Pub. L. 107-204, 116 Stat. 745, 
and secs. 2 and 3, Pub. L. 116-222, 134 Stat. 1063.
* * * * *
    Section 249.308a is also issued under secs. 3(a) and 302, Pub. 
L. 107-204, 116 Stat. 745.
* * * * *
    Section 249.310 is also issued under secs. 3(a), 202, 208, 302, 
406 and 407, Pub. L. 107-204, 116 Stat. 745.
* * * * *

0
10. Amend Form 20-F (referenced in Sec.  249.220f) by revising Part II, 
Item 16E.

    Note:  Form 20-F is attached as Appendix A to this document. 
Form 20-F will not appear in the Code of Federal Regulations.

0
11. Amend Form 10-Q (referenced in Sec.  249.308a) by revising the 
heading of Item 2 in Part II, paragraph (c) to Item 2 in Part II, and 
paragraph (c) to Item 5 in Part II.

    Note:  Form 10-Q is attached as Appendix B to this document. 
Form 10-Q will not appear in the Code of Federal Regulations.

0
12. Amend Form 10-K (referenced in Sec.  249.310) by revising General 
Instruction J(1)(l), paragraph (c) to Item 5 in Part II and Item 9B in 
Part II.

    Note:  Form 10-K is attached as Appendix C to this document. 
Form 10-K will not appear in the Code of Federal Regulations.

0
13. Add Sec.  249.333 to read as follows:

Sec.  249.333  Form F-SR.

    This form shall be used for reporting of purchases by or on behalf 
of the issuer or an affiliated purchaser of equity securities 
registered by the issuer pursuant to section 12 of the Exchange Act (15 
U.S.C. 781) that does not file quarterly reports on Form 10-Q (Sec.  
249.308a), and annual reports on Form 10-K (Sec.  249.310), pursuant to 
Sec.  240.13a-21 of this chapter.

0
14. Add Form F-SR (referenced in Sec.  249.333).

    Note: Form F-SR is attached as Appendix D to this document. Form 
F-SR will not appear in the Code of Federal Regulations.

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
15. The general authority citation for part 274 continues to read as 
follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and 80a-37 unless 
otherwise noted.
* * * * *

[[Page 36059]]

0
16. Amend Form N-CSR (referenced in Sec. Sec.  249.331 and 274.128) by 
revising Item 14.

    Note: The text of Form N-CSR is attached as Appendix E to this 
document. Form N-CSR will not appear in the Code of Federal 
Regulations.

    By the Commission.

    Dated: May 3, 2023.
Vanessa A. Countryman,
Secretary.

Appendix A--Form 20-F

Form 20-F

* * * * *

Part II

* * * * *

Item 16E Purchases of Equity Securities by the Issuer and Affiliated 
Purchasers

    (a) For the Form F-SRs filed during the fiscal year covered by 
the Form 20-F, disclose the specified information in narrative form 
with respect to the issuer's repurchases of equity securities that 
were disclosed in the issuer's Form F-SRs (required by Sec.  
240.13a-21 of this chapter), and refer to the particular repurchases 
in the table in the applicable Form F-SR that correspond to the 
different parts of the narrative, if applicable:
    (1) The objectives or rationales for each repurchase plan or 
program and the process or criteria used to determine the amount of 
repurchases.
    (2) The number of shares (or units) purchased other than through 
a publicly announced plan or program, and the nature of the 
transaction (e.g., whether the purchases were made in open-market 
transactions, tender offers, in satisfaction of the issuer's 
obligations upon exercise of outstanding put options issued by the 
company, or other transactions).
    (3) For publicly announced repurchase plans or programs:
    (i) The date each plan or program was announced;
    (ii) The dollar amount (or share or unit amount) approved;
    (iii) The expiration date (if any) of each plan or program;
    (iv) Each plan or program that has expired during the period 
covered by the tables in Form F-SRs; and
    (v) 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.
    (4) Any policies and procedures relating to purchases and sales 
of the issuer's securities by its directors and members of senior 
management during a repurchase program, including any restrictions 
on such transactions.
    (b) The disclosure provided pursuant to this Item must be 
provided in an Interactive Data File as required by Sec.  232.405 of 
this chapter (Rule 405 of Regulation S-T) in accordance with the 
EDGAR Filer Manual.
* * * * *

Appendix B--Form 10-Q

FORM 10-Q

* * * * *

Part II--Other Information

* * * * *
    Item 2. Unregistered Sales of Equity Securities, Use of 
Proceeds, and Issuer Purchases of Equity Securities.
    (c) Furnish the information required by Item 703 of Regulation 
S-K (Sec.  229.703 of this chapter) for any repurchases made in the 
quarter covered by the report.
* * * * *
    Item 5. Other Information.
* * * * *
    (c) Furnish the information required by Items 408(a) and 408(d) 
of Regulation S-K ((Sec. Sec.  229.408(a) and 229.408(d)).
* * * * *

FORM 10-K

* * * * *

General Instructions

* * * * *

J. Use of This Form by Asset-Backed Issuers

* * * * *
    (1) * * *
* * * * *
    (l) Item 9A, Controls and Procedures and Item 9B(b), Other 
Information;
* * * * *

Part II

* * * * *

Item 5. Market for Registrant's Common Equity, Related Stockholder 
Matters and Issuer Purchases of Equity Securities

* * * * *
    (c) Furnish the information required by Item 703 of Regulation 
S-K (Sec.  229.703 of this chapter) for any repurchase made in the 
fourth quarter of the fiscal year covered by the report.
* * * * *

Item 9B. Other Information

    (a) The registrant must disclose under this item any information 
required to be disclosed in a report on Form 8-K during the fourth 
quarter of the year covered by this Form 10-K, but not reported, 
whether or not otherwise required by this Form 10-K. If disclosure 
of such information is made under this item, it need not be repeated 
in a report on Form 8-K which would otherwise be required to be 
filed with respect to such information or in a subsequent report on 
Form 10-K.
    (b) Furnish the information required by Items 408(a) and 408(d) 
of Regulation S-K (Sec. Sec.  229.408(a) and 229.408(d) of this 
chapter).
* * * * *

Appendix D--Form F-SR

United States Securities and Exchange Commission

Washington, DC 20549

FORM F-SR

Foreign Private Issuer Share Repurchase Report

-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
-----------------------------------------------------------------------
(Translation of Registrant's name into English)
-----------------------------------------------------------------------
(Jurisdiction of incorporation or organization)
-----------------------------------------------------------------------
(Address of Principal Executive Offices)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Name, Telephone, Email and/or Facsimile number and Address of 
Company Contact Person)

    Securities registered pursuant to Section 12(b) of the Act:

------------------------------------------------------------------------
                                     Trading      Name of each exchange
      Title of each class           symbol(s)      on which registered
------------------------------------------------------------------------
 
------------------------------------------------------------------------

    Securities registered pursuant to section 12(g) of the Act:
-----------------------------------------------------------------------
(Title of class)
-----------------------------------------------------------------------
(Title of class)

General Instructions

I. Repurchases To Be Reported and Time for Filing of Report

    If purchases are made by or on behalf of the registrant or any 
``affiliated purchaser,'' as defined in 17 CFR 10b-18(a)(3) of this 
chapter, of shares or other units of any class of the registrant's 
equity securities that is registered pursuant to section 12 of the 
Securities Exchange Act of 1934 (15 U.S.C. 781), file with the 
Commission in accordance with the requirements of 17 CFR 240.13a-21 
(Rule 13a-21) the information set forth below in an Interactive Data 
File as required by 17 CFR 232.405 of this chapter (Rule 405 of 
Regulation S-T) in accordance with the EDGAR Filer Manual within 45 
days after the end of the registrant's fiscal quarter.

[[Page 36060]]

II. Items To Be Disclosed in Form F-SR

    (a) The date, which is the date on which the purchase of shares 
(or units) is executed (column (a));
    (b) The class of shares (or units), which should clearly 
identify the class, even if the registrant has only one class of 
securities outstanding (column (b));
    (c) The total number of shares (or units) purchased on this 
date, which includes all shares (or units) purchased by or on behalf 
of the registrant or any affiliated purchaser, regardless of whether 
made pursuant to publicly announced repurchase plans or programs 
(column (c));
    (d) The average price paid per share (or unit), which shall be 
reported in U.S. dollars and exclude brokerage commissions and other 
costs of execution (column (d));
    (e) The total number of shares (or units) purchased on this date 
as part of publicly announced repurchase plans or programs (column 
(e));
    (f) The aggregate maximum number (or approximate dollar value) 
of shares (or units) that may yet be purchased under the publicly 
announced repurchase plans or programs (column (f));
    (g) Total number of shares (or units) purchased on this date on 
the open market, which includes all shares (or units) repurchased by 
the registrant in open-market transactions, and does not include 
shares (or units) purchased in tender offers, in satisfaction of the 
registrant's obligations upon exercise of outstanding put options 
issued by the registrant, or other transactions (column (g));
    (h) Total number of shares (or units) purchased on this date 
that are intended by the registrant to qualify for the safe harbor 
in Sec.  240.10b-18 of this chapter (Rule 10b-18) (column (h)); and
    (i) Total number of shares (or units) purchased on this date 
pursuant to a plan that is intended by the registrant to satisfy the 
affirmative defense conditions of Sec.  240.10b5-1(c) of this 
chapter (Rule 10b5-1(c)) (column (i)).
    (j) Disclose, by footnote to the table, the date any plan that 
is intended to satisfy the affirmative defense conditions of Rule 
10b5-1(c) for the shares (or units) in column (i) was adopted or 
terminated.

III. Instructions for Preparing the Report

    (a) This form is not to be used as a blank form to be filled in, 
but only as a guide in the preparation of the report meeting the 
requirements of 17 CFR 240.13a-21 (Rule 13a-21). The report shall 
contain all columns of the table, and any columns for which there is 
no relevant information may be appropriately marked or left blank. 
The table may contain additional columns as necessary to provide 
disclosure responsive to the requirements of Rule 13a-21 provided 
the answers thereto are prepared in the manner specified in Rule 
12b-13 (17 CFR 240.12b-13). These General Instructions are not to be 
filed with the report.
    (b) The disclosure provided relates to the registrant's 
securities in ordinary share form, whether the registrant has 
repurchased the shares or depositary receipts that represent the 
shares.
    (c) Price data and other data should be stated in the same 
currency used in the registrant's primary financial statements.
    (d) In determining whether to check the box under ``Registrant 
Purchases of Equity Securities,'' the registrant may rely on written 
representations from the directors and senior management who would 
be identified pursuant to Item 1 of Form 20-F, provided that the 
reliance is reasonable. The registrant must maintain the 
representation in its records for two years, making a copy available 
to the Commission or its staff upon request.

IV. Submission of the Form

    This form must be submitted in electronic format via our 
Electronic Data Gathering Analysis and Retrieval System (EDGAR) in 
accordance with EDGAR rules set forth in Regulation S-T (17 CFR part 
232). You must provide the signatures required for the Form in 
accordance with 17 CFR 232.302.
BILLING CODE 8011-01-P

[[Page 36061]]

[GRAPHIC] [TIFF OMITTED] TR01JN23.002

BILLING CODE 8011-01-C

[[Page 36062]]

Appendix E--Form N-CSR

Form N-CSR

* * * * *

Item 14. Purchases of Equity Securities by Closed-End Management 
Investment Company and Affiliated Purchasers

    (a) Purchases of Equity Securities by the Registrant and 
Affiliated Purchasers.
    (i) If the registrant is a closed-end management investment 
company, provide the specified information in the following tabular 
format, disclosing, for the period covered by the report, the total 
purchases made during each day by or on behalf of the registrant or 
any ``affiliated purchaser,'' as defined in Sec.  240.10b-18(a)(3) 
of this chapter, of shares or other units of any class of the 
registrant's equity securities that is registered by the registrant 
pursuant to section 12 of the Exchange Act.
    (ii) Disclose in the table:
    (A) The date, which is the date on which the purchase of shares 
(or units) is executed (column (a));
    (B) The class of shares (or units), which should clearly 
identify the class, even if the registrant has only one class of 
securities outstanding (column (b));
    (C) The total number of shares (or units) purchased on this 
date, which includes all shares (or units) purchased by or on behalf 
of the registrant or any affiliated purchaser, regardless of whether 
made pursuant to publicly announced repurchase plans or programs 
(column (c));
    (D) The average price paid per share (or unit), which shall be 
reported in U.S. dollars and exclude brokerage commissions and other 
costs of execution (column (d));
    (E) The total number of shares (or units) purchased on this date 
as part of publicly announced repurchase plans or programs (column 
(e));
    (F) The aggregate maximum number (or approximate dollar value) 
of shares (or units) that may yet be purchased under the publicly 
announced repurchase plans or programs (column (f));
    (G) Total number of shares (or units) purchased on this date on 
the open market, which includes all shares (or units) repurchased by 
the registrant in open-market transactions, and does not include 
shares (or units) purchased in tender offers, in satisfaction of the 
registrant's obligations upon exercise of outstanding put options 
issued by the registrant, or other transactions (column (g));
    (H) Total number of shares (or units) purchased on this date 
that are intended by the registrant to qualify for the safe harbor 
in Sec.  240.10b-18 (Rule 10b-18) of this chapter (column (h)); and
    (I) Total number of shares (or units) purchased on this date 
pursuant to a plan that is intended by the registrant to satisfy the 
affirmative defense conditions of Sec.  240.10b5-1(c) (Rule 10b5-
1(c)) of this chapter (column (i)).
    (iii) Disclose, by footnote to the table, the date any plan that 
is intended to satisfy the affirmative defense conditions of Rule 
10b5-1(c) for the shares (or units) in column (i) was adopted or 
terminated.
    (iv) In determining whether to check the box under ``Registrant 
Purchases of Equity Securities,'' the registrant may rely on the 
following, unless the registrant knows or has reason to believe that 
a form was filed inappropriately or that a form should have been 
filed but was not:
    (A) A review of Forms 3 and 4 (17 CFR 249.103 and 249.104) and 
amendments thereto filed electronically with the Commission during 
the registrant's most recent fiscal year;
    (B) A review of Form 5 (17 CFR 249.105) and amendments thereto 
filed electronically with the Commission with respect to the 
registrant's most recent fiscal year; and
    (C) Any written representation from the reporting person that no 
Form 5 is required. The registrant must maintain the representation 
in its records for two years, making a copy available to the 
Commission or its staff upon request.
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    (b) Disclose the specified information in narrative form with 
respect to the registrant's repurchases of equity securities 
disclosed in paragraph (a) and refer to the particular repurchases 
in the table in paragraph (a) that correspond to the different parts 
of the narrative, if applicable:
    (1) The objectives or rationales for each repurchase plan or 
program and the process or criteria used to determine the amount of 
repurchases;
    (2) The number of shares (or units) purchased other than through 
a publicly announced plan or program, and the nature of the 
transaction (e.g., whether the purchases were made in open-market 
transactions, tender offers, in satisfaction of the registrant's 
obligations upon exercise of outstanding put options issued by the 
registrant, or other transactions);
    (3) For publicly announced repurchase plans or programs:
    (i) The date each plan or program was announced;
    (ii) The dollar amount (or share or unit amount) approved;
    (iii) The expiration date (if any) of each plan or program;
    (iv) Each plan or program that has expired during the period 
covered by the table in paragraph (a); and
    (v) Each plan or program the registrant has determined to 
terminate prior to expiration, or under which the registrant does 
not intend to make further purchases.
    (4) Any policies and procedures relating to purchases and sales 
of the registrant's securities by its officers and directors during 
a repurchase program, including any restrictions on such 
transactions.
    (c) The disclosure provided pursuant to this Item must be 
provided in an Interactive Data File as required by Sec.  232.405 of 
this chapter (Rule 405 of Regulation S-T) in accordance with the 
EDGAR Filer Manual.

[FR Doc. 2023-09965 Filed 5-31-23; 8:45 am]
BILLING CODE 8011-01-C