Yes – a Thanksgiving tradition continued last week when President Biden pardoned turkeys Liberty and Bell from what would otherwise have been an unpleasant Thanksgiving experience.

That’s not the only leniency (albeit probably not as long-lasting as the reprieve given Liberty and Bell) dispensed by the government this week. Our story actually begins on Halloween, when the Fifth Circuit U.S. Court of Appeals issued an opinion¹ that gave the Securities and Exchange Commission (“Commission”) 30 days to “correct the defects” in the recently-adopted share repurchase rule.² In response, on the day before Thanksgiving, the Commission issued an order (the “Stay Order”)³ staying the effectiveness of the Repurchase Rule.

As usual – sounds easy – right? Well – consider this:

• The Repurchase Rule primarily did three things:
  • added S-K Item 408(d), which would require certain disclosures regarding the adoption and termination of Rule 10b5-1 plans by issuers (the “Issuer 10b5-1 Disclosures”);⁴
  • revised S-K Item 601, which would add (when applicable) a new Exhibit 26 to Forms 10-Q and 10-K – a detailed table that requires disclosure of, among other things, daily information regarding stock repurchases that are made during the quarter covered (fourth quarter in the case of a Form 10-K) by the report (the “Daily Repurchase Disclosures”); and 
  • revised S-K Item 703, which would require disclosure in Forms 10-Q and 10-K regarding the “objectives” and “rationales” for the repurchases being disclosed in the report (the “Repurchase Rationale Disclosures”).
• The challenge to the Repurchase Rule began as a Petition for Review under the Administrative Procedures Act by the U.S. Chamber of Commerce for a “review of the order (emphasis added) of the [Commission] issuing [the Repurchase Rule]”. The order referenced (see Note 2) includes all of the elements described above (i.e., the Issuer 10b5-1 Disclosures, the Daily Repurchase Disclosures and the Repurchase Rationale Disclosures).
• The only things discussed in the Fifth Circuit’s order are the Daily Repurchase Disclosures and the Repurchase Rational Disclosures – nowhere in the opinion is there any reference to the Issuer 10b5-1 Disclosures. Those disclosures, for all intents and purposes, are identical to the Officer/Director 10b5-1 Disclosures, which remain in effect.
• The Stay Order stays the “Repurchase Rule,” which one can only presume refers to all of the elements describe above that are contained within that order (i.e., the Issuer 10b5-1 Disclosures, the Daily Repurchase Disclosures and the Repurchase Rationale Disclosures) – this despite that the fact that there appears to have been no challenge to the Issuer 10b5-1 Plan Disclosures.

So – should companies begin to comply with the Issuer 10b5-1 Disclosures? Well – I suppose that depends. Does the Stay Order apply to everything in the Repurchase Rule – or just the new “repurchase” aspects of the rule – the Daily Repurchase Disclosures and the Repurchase Rationale Disclosures. If it is “everything,” then companies will not have to immediately comply with the new disclosures and associated iXBRL tagging requirements that otherwise would have been applicable for periodic reports covering the first full fiscal quarter beginning on or after October 1, 2023,⁵ (i.e., for calendar year companies, the Form 10-K for the 12/31/2023 fiscal year). The delayed disclosures relate to:

• Form 10-Q – Part II, Item 2(c) and Form 10-K – Part II, Item 5(c) (incorporating the Repurchase Rationale Disclosures from revised S-K Item 703 for the repurchases being disclosed in the report);
• Form 10-Q – Part II, Item 5(c) and Form 10-K – Part II, Item 9B(b) (incorporating the Issuer 10b5-1 Disclosures from new S-K Item 408(d)); and 
• The new Exhibit 26 (the Daily Repurchase Disclosures) that would have been required in Forms 10-Q and 10-K when repurchases are made during the quarter covered by the report.

Hope everyone kept their old copies of what Forms 10-K and 10-Q required, as well as their “old” copy of S-K Item 703 – that’s presumably what will be in effect until the dispute regarding the new Repurchase Rule is resolved. If you didn’t happen to keep a copy of the “old” one, it is set forth on the following two pages.

Well – that’s Thanksgiving – wonder what’s for Christmas? Last year, it was the new 10b5-1 rules!

Pre-2023 S-K Item 703

§ 229.703 Purchases of equity securities by the issuer and affiliated purchasers.

(a) In the following tabular format, provide the information specified in paragraph (b) of this Item with respect to any purchase made by or on behalf of the issuer or any “affiliated purchaser,” as defined in § 240.10b-18(a)(3) of this chapter, 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 Exchange Act (15 U.S.C. 78l).

Issuer Purchases of Equity Securities

(b) The table shall include the following information for each class or series of securities for each month included in the period covered by the report:

1. The total number of shares (or units) purchased (column (a));
   
   Instruction to paragraph (b)(1) of Item 703: Include in this column all issuer repurchases, including those made pursuant to publicly announced plans or programs and those not made pursuant to publicly announced plans or programs. Briefly disclose, by footnote to the table, the number of shares 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 company’s obligations upon exercise of outstanding put options issued by the company, or other transactions).
    
2. The average price paid per share (or unit) (column (b));
3. The total number of shares (or units) purchased as part of publicly announced repurchase plans or programs (column (c)); and
4. The maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (column (d)).

Instructions to paragraphs (b)(3) and (b)(4) of Item 703: 

1. In the table, disclose this information in the aggregate for all plans or programs publicly announced.
2. By footnote to the table, indicate:
   1. The date each plan or program was announced;
   2. The dollar amount (or share or unit amount) approved;
   3. The expiration date (if any) of each plan or program;
   4. Each plan or program that has expired during the period covered by the table; and
   5. 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.

Instruction to Item 703: Disclose all purchases covered by this Item, including purchases that do not satisfy the conditions of the safe harbor of § 240.10b-18 of this chapter. [68 FR 64969, Nov. 17, 2003]

^{1 See Chamber of Commerce of the USA v. SEC, 85 F.4th 760 (5th Cir. 2023).}

^{2 Share Repurchase Disclosure Modernization, Release No. 34-97424 (May 3, 2023), 88 Fed. Reg. 36002 (June 1, 2023) (the “Repurchase Rule”).}

^{3 Release No. 34-99011 (Nov. 22, 2023) – In the Matter of Share Repurchase Disclosure Modernization.}

^{4 Note – presumably unaffected is the currently effective requirement to furnish certain quarterly disclosures regarding the adoption and termination of Rule 10b5-1 trading arrangements and “non-Rule 10b5-1 trading arrangements” by the company’s directors and executive officers (the “Officer/Director 10b5-1 Disclosures”). These were adopted in Insider Trading Arrangements and Related Disclosures, Release No. 34-96492 (Dec. 14, 2022).}

^{5 Absent the Stay Order, foreign private issuers using Form 20-F would have been required to comply with these disclosures by filing a new Form F-SR beginning with the quarter ending June 30, 2024. Given the timing of the court’s decision and the Stay Order, we expect that, if the resolution of the judicial process results in the Repurchase Rule remaining in place, these compliance dates will be delayed.}