[Federal Register Volume 88, Number 105 (Thursday, June 1, 2023)]
[Rules and Regulations]
[Pages 36002-36063]
[FR Doc No: 2023-09965]

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<PHONE_NUMBER>, Division of Corporation
Finance; and, with respect to the application to investment companies,
Quinn Kane, Special Counsel, at<PHONE_NUMBER>, 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

    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

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

     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'').

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

    At present, because issuers are not required to report daily
repurchase transactions or provide additional qualitative disclosures
about those transactions, it can be difficult to determine whether
repurchase timing may have been motivated, at least in part, by factors
other than long-term value maximization. For example, issuer
repurchases may be influenced, in part, by a desire to achieve certain
accounting metrics or for other potentially suboptimal reasons.\32\
Some research has found that issuers that would have narrowly missed an
earnings per share (``EPS'') target were more likely to have engaged in
repurchases,\33\ which through their mechanical effect of decreasing
the denominator of that measure help such issuers to meet their target.
---------------------------------------------------------------------------

    \32\ See Graham J.R., Harvey, C.R. & Rajgopal, S., The Economic
Implications of Corporate Financial Reporting, 40 J. Acct. & Econ. 3
(2005) (reporting that about 12 percent of surveyed executives would
use repurchases to meet an earnings forecast); see also Rulemaking
Petition 4-746, Rulemaking Petition Requesting Repeal and Reform of
Rule 10b-18 to Address Manipulative Repurchase Programs that Harm
Workers, at 4 (June 25, 2019), available at https://www.sec.gov/rules/petitions/2019/petn4-746.pdf (citing research that repurchases
can be used to inflate share price and EPS-linked executive
compensation) (``Rulemaking Petition 4-746''). The 2020 Staff Study
found that, while a majority of the issuers included in the study
either did not have EPS-linked compensation targets or had EPS
targets but their board considered the impact of repurchases when
determining whether performance targets were met or in setting the
targets, approximately 18 percent of repurchasing issuers made
compensatory awards based in part on EPS. See 2020 Staff Study,
supra note 27. Other studies have considered repurchasing issuers
that employed EPS or similar measures for other internal
evaluations, such as promotion or retention, see Bennett, B. et al.,
Compensation Goals and Firm Performance, 124 J. Fin. Econ. 307, 310,
325 (2017) (reporting that executives who just miss performance
thresholds are less likely to be retained), and for the purposes of
creditors or outside analysts, see Kurt, A. C., Managing EPS and
Signaling Undervaluation as a Motivation for Repurchases: The Case
of Accelerated Share Repurchases, 17 Rev. Acct. & Fin. 453 (2018)
(noting that executives manage EPS in order to satisfy creditors and
suppliers, among other reasons) (``Kurt''). For additional academic
research on the use of repurchases as a method of real earnings
management, see infra notes 416-420 and accompanying text.
    \33\ See Almeida, H., Fos, V., & Kronlund, M., The Real Effects
of Share Repurchases, 119 J. Fin. Econ. 168 (2016) (``Almeida et al.
(2016)'') and Hribar, P., Jenkins, N., & Johnson, W.B., Stock
Repurchases as an Earnings Management Device, 41 J. Acct. & Econ. 3
(2006) (``Hribar et al. (2006)'').
---------------------------------------------------------------------------

    The fact that repurchases can significantly impact executive
compensation for some issuers may also affect how managers choose to
employ repurchases. Like all investors, executives who receive equity-
linked compensation stand to benefit from repurchases that improve
their employer's long-term stock price, but in some cases executives
may realize additional gains unavailable to other investors because of
trading by executives or the structure of compensation to those
executives. Some studies have found personal trading by insiders close
in time to predictable changes in share price caused by repurchases or
repurchase-plan announcements, such as concentrated sales in the period
immediately following the issuer's repurchase.\34\ Issuers may also
adjust the timing of their repurchases or repurchase announcements to
increase the returns on insider equity sales.\35\ In these cases, by
timing their sales to closely follow issuer purchases, executives can
benefit in ways that confer a personal benefit to executives without
necessarily increasing the value of the firm.\36\ Thus, equity-based or
EPS-tied compensation arrangements could potentially be one factor that
may influence some executives' decisions to undertake repurchases.\37\
Shareholders may not have sufficient information about all of these
possible purposes and impacts of issuer repurchases.
---------------------------------------------------------------------------

    \34\ See Jackson, Jr., R.J., Stock Buybacks and Corporate
Cashouts, Speech by Commissioner Jackson Before the Center for
American Progress (June 11, 2018), available at https://www.sec.gov/news/speech/speech-jackson-061118 (``Jackson Speech''); Ben-Raphael,
A., Oded, J., & Wohl, A., Do Firms Buy Their Stock at Bargain
Prices? Evidence from Actual Stock Repurchase Disclosures, 18 Rev.
Fin. 1299 (2014); Edmans, A., Fang, V.W., & Huang, A. H., The Long-
Term Consequences of Short-Term Incentives, 60 J. Acct. Res. 1007,
1024 (2022) (``Edmans et al. (2022)''); Moore, D., Strategic
Repurchases and Equity Sales: Evidence from Vesting Schedules, 146
J. Banking & Fin. 106717 (2023) (``Moore''); Wang, Z., Yin, Q.E., &
Yu, L., Real Effects of Share Repurchases Legalization on Corporate
Behaviors, 140 J. Fin. Econ. 197 (2021); see also Cziraki P.,
Lyandres, E., & Michaely, R., What Do Insiders Know? Evidence from
Insider Trading Around Share Repurchases and SEOs, 66 J. Corp. Fin.
101544 (2021) (``Cziraki et al. (2021)'') (finding that insider
sales decline ahead of repurchases). One commenter provided us with
economic analysis by Professors Lewis and White disputing the
findings from Commissioner Jackson's Speech. See letter from U.S.
Chamber of Commerce (Apr.1, 2022) (``Chamber II''). But see letter
from Prof. Jackson, Dr. Hu, and Dr. Zytnick in response (asserting
that Lewis and White's analysis of the Jackson data confirms, rather
than undermines, the Jackson conclusion).
    \35\ See Edmans et al. (2022), supra note 34; see also Edmans,
A., Goncalves-Pinto, L., Groen-Xu, M., & Wang, Y., Strategic News
Releases in Equity Vesting Months, 31 Rev. Fin. Stud. 4099 (2018)
(``Edmans et al. (2018)'') (reporting that firms disproportionately
release positive news items, including buyback announcements, in
months when CEO equity vests) and Moore, supra note 34.
    \36\ See Edmans et al. (2022), supra note 34; see also Moore,
supra note 34, at 2 (reporting that author's findings are
``consistent with managers strategically using share repurchases to
personally benefit from the positive effects of repurchasing on the
stock price'').
    \37\ Edmans et al. (2022), supra note 34, at 1010, 1034 (noting
their findings ``are consistent with the CEO announcing repurchases
to falsely signal undervaluation to the market to improve the
conditions for his equity sales''); see also Kurt, supra note 32
(finding evidence that ``managerial incentives--securing bonuses and
maintaining reputations by avoiding EPS misses--potentially lie
behind the opportunistic use'' of some share repurchases). For a
further discussion of the use of repurchases to potentially
influence compensation tied to per-share measures, see infra note
422.
---------------------------------------------------------------------------

    Some commenters who opposed the proposed amendments questioned the
premise that stock repurchases are deliberately used to enhance
executive compensation or otherwise benefit insiders looking to sell
their shares.\38\ One of these commenters stated that ``[c]oncerns
about companies' using share repurchases to impact earnings per share
(`EPS') or executive compensation are unfounded and ignore existing
protections,'' and pointed to recent academic work that, in the
commenter's view, undermines the premise that executives undertake
repurchases to boost their compensation.\39\ To the extent that
opposing commenters interpret this research to mean that opportunism or
self-interest cannot be a significant motivating factor for share
repurchases, we disagree with their assessment of the underlying
evidence.\40\ In this regard,

we share the assessment of other commenters who argued that the
research cited by opposing commenters does not undermine the
proposition that personal benefit may be a factor in determining
whether to undertake a share repurchase.\41\
---------------------------------------------------------------------------

    \38\ See letters from Chamber II and Craig M. Lewis, Professor
of Law and Joseph T. White, Assistant Professor of Finance,
Vanderbilt University (Oct. 7, 2022) (``Profs. Lewis and White'').
    \39\ See letter from Profs. Lewis and White. Among other
research, Profs. Lewis and White cite Guest, N., Kothari, S.P., &
Venkat, P., Share Repurchases on Trial: Large-Sample Evidence on
Share Price Performance, Executive Compensation, and Corporate
Investment, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4149796, at 16 (Jan. 2023) (``Guest et al.'')
(asserting that the study's findings that repurchases do not distort
prices ``helps rule out [the] possibility'' that insiders can ``sell
a portion of their shares at prices that are inflated due to a
buyback'') and PWC, Share Repurchases, Executive Pay and Investment,
BEIS Research Paper Number 2019/11, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/817978/share-repurchases-executive-pay-investment.pdf (finding that in the U.K. there is no or only weak
evidence that repurchases are used to achieve EPS targets).
    \40\ For example, with respect to Guest et al., supra note 39,
as the authors of the study report, large repurchasers enjoy
superior returns in the quarter after repurchase, id. at 15, but
perform similarly to non-repurchasers in the following year, id. at
16. This may be consistent with short-term gains from EPS or other
manipulation that are dissipated as more complete information
becomes available to the market, as the researchers appear to
acknowledge in a footnote, see id. at 16 n.19. Such changes in value
would create opportunities for executives to profit from trades
close in time to repurchases. In addition, the authors focus only on
behavior of the largest or most frequent repurchasers, and market-
wide correlations estimated based on those issuers are not
necessarily probative of the behavior of the issuers who stand to
benefit most from small changes in EPS. We are thus more persuaded
by the studies that do find opportunities for executives to profit
from repurchases. See supra note 34. Similarly, with respect to the
PWC study, supra note 39, we note that the U.K. has required next-
day reporting of repurchases since 1981, which may discourage
issuers from attempting to manipulate accounting metrics with
repurchases, because daily data would reveal instances where
repurchases were undertaken at a time when it was obvious to
management they would otherwise miss an EPS target.
    The opposing commenters also point to research suggesting that
insider sales following a repurchase or repurchase announcement are
due to coincidences of the corporate calendar (i.e., repurchases
occurring near in time to the expiration of blackout periods), not
deliberate efforts by insiders to benefit from repurchase activity.
See letter from Chamber II (citing Dittmann, I., Lu, A. Y.,
Obernberger, S., & Zheng, J. The Corporate Calendar and the Timing
of Share Repurchases and Equity Compensation, Working paper (2022)
(``Dittmann et al. (2022)''). But as another commenter observed:
``it does not matter if the equity sales are `mechanical' due to
occurring after the end of a blackout period, or `voluntary'. If the
CEO knows that she will be able to sell equity, due to the blackout
period ending, this may still influence her buyback decision.'' See
letter from Prof. Edmans.
    \41\ See letters from Prof. Jackson, Dr. Hu, and Dr. Zytnick and
Prof. Edmans.
---------------------------------------------------------------------------

    Moreover, we believe opposing commenters have misconstrued the
nature of the concern the proposed amendments sought to address. As
explained below, it is not necessary to find that opportunism drives
the timing of most issuer share repurchases to conclude that it is
appropriate for investors to have more useful information about such
repurchases. Indeed, as the author of several of the studies cited by
these commenters observed, personal benefit may not be ``the only, or
even most important, factor (as the terms `manipulation' or
`opportunism' would suggest) but it may be a consideration. Thus, one
does not need to believe that share buybacks are used for
manipulation--a high hurdle--to find merit in the SEC's proposal.''
\42\ While this commenter specifically referenced the proposal to
require disclosure of any policies and procedures relating to purchases
and sales of the issuer's securities by its officers and directors, we
believe all of the quantitative and qualitative disclosure requirements
that we are adopting in this release together will serve to alert
investors to the possibility of repurchases being motivated, at least
in part, by goals unconnected to increasing shareholders value or
signaling the issuer's view that its stock is undervalued.\43\
---------------------------------------------------------------------------

    \42\ See letter from Prof. Edmans.
    \43\ See id.
---------------------------------------------------------------------------

    Currently, investors cannot readily determine the purposes behind
any given share repurchase, and this uncertainty may have adverse
effects on investors and markets. When managers may personally benefit
from repurchases or their timing, it is not as evident, for example,
that a repurchase is intended to distribute excess cash or signal
management's views about the issuer's fundamental value, rather than to
benefit the manager personally. Similarly, if issuers may adjust the
volume or timing of repurchases to reach certain accounting targets or
for other reasons that are not intended to signal management's views
about the firm's value or to return excess cash, such as protecting the
issuer's reputation or managing relationships with customers or
suppliers, some of which may even run counter to the interest of
shareholders, the signal sent by all repurchases is muddied. This
market failure may make it more difficult for investors to value a
company or identify when an issuer's use of cash is well-managed,
reducing investor confidence and market liquidity.\44\
---------------------------------------------------------------------------

    \44\ We discuss in more detail the market failures addressed by
the amendments in the Economic Analysis section, below. See infra
Section V.B.1.
---------------------------------------------------------------------------

    The additional disclosures that we are adopting, including of daily
quantitative repurchase data, will provide investors with enhanced
information to assess the purposes and effects of repurchases,
including whether those repurchases may have been taken for reasons
that may not increase an issuer's value. At the same time, we are
mindful that any enhanced disclosure requirements will come at a cost
for issuers, and ultimately shareholders, and should be appropriately
tailored to address their intended aims. For those reasons, as
discussed more fully below, we have made certain changes to the final
amendments to help limit the compliance burden on issuers while still
providing investors with the information they need to better assess the
efficiency of, and motives behind, issuer repurchases.

B. Purpose of the Amendments

    As we have just described, issuers repurchase shares for multiple
reasons. In many cases, share repurchases may represent an efficient
use of the issuer's capital, such as when returning money to
shareholders exceeds other possible internal investments of
capital.\45\ However, some uses of share repurchases may not be
efficient, such as repurchases conducted to increase management
compensation or to affect various accounting metrics, in either case
when those actions do not increase the value of the firm.\46\
---------------------------------------------------------------------------

    \45\ See supra notes 27-29 and accompanying text.
    \46\ See supra notes 30-33 and accompanying text.
---------------------------------------------------------------------------

    Current repurchase disclosure requirements, which do not require
the issuer to provide quantitative daily repurchase information or
state the objectives or rationales for its repurchases and are reported
in the aggregate at the monthly level, provide investors with
insufficient insight into the efficiency, purposes, and impacts of an
issuer's share repurchases. This frustrates the ability of investors to
separate out and assess the different motivations and impacts of share
repurchases. We have determined that additional disclosures are needed
to remedy these market failures.
    Given common frictions on voluntary reporting of this information,
including the strong possibility of significant divergences in the
interests of managers and other investors, we believe mandatory
disclosures are necessary to overcome these informational asymmetries
between issuers and their managers on the one hand and investors on the
other. The additional qualitative disclosures we are adopting will
provide investors with additional information about the structure of an
issuer's repurchase program and its share repurchases that will enable
them to better understand how and why those repurchases are conducted.
The qualitative disclosures, when combined with the daily repurchase
activity disclosure, will allow investors to draw clearer and more
informed conclusions about the purposes and effects of share
repurchases.
    The current reporting regime, in which investors receive
information only about the monthly aggregate repurchases of issuers,
fails to provide enough detail for investors to draw informed
conclusions about the purposes and effects of many repurchases. In
contrast, the amendments we are adopting will provide investors with
data about the daily repurchase activity of an issuer and additional
qualitative disclosures that investors can combine with other
disclosures, such as the timing of compensatory awards or executive
equity transactions, to observe whether a given repurchase was apt to
affect executive compensation. Data on daily transactions and the
additional qualitative disclosures would also reveal patterns in which
repurchases were undertaken at times or under conditions that were
likely to affect imminent accounting metrics, or prior

to the release of material nonpublic information by the issuer.
Investment advisers may use this data in assisting investors in
assessing the purposes and effects of share repurchases.
    Requiring that issuers provide disclosures of daily share
repurchases as well as qualitative data will better enable investors to
assess the efficiency, purposes, and impacts of share repurchases.
These disclosures will allow investors to better evaluate whether a
share repurchase was intended to increase the value of the firm or
represented an inefficient deployment of capital, such as by either
providing additional compensation to management or impacting accounting
metrics in ways that were not intended to increase overall firm value.
Disclosures of daily repurchase data and qualitative disclosures may
indicate that management may have timed share repurchases in order to
meet certain earnings goals or targets, to support insiders' trading
positions or to otherwise increase insider compensation. Enhancing the
ability of investors to assess the efficiency, purposes, and impacts of
issuer repurchases would benefit investors and could improve market
efficiency and capital formation.
    Accordingly, the purpose of these amendments is to improve the
information investors receive to better assess the efficiency of, and
motives behind, an issuer repurchase. In proposing to amend Item 703,
the Commission expressed the view that enhanced disclosure about share
repurchases would allow investors to ``[b]etter understand an issuer's
motivation for its share repurchase.'' \47\ In this way, the proposed
amendments aimed to assist investors in distinguishing between share
repurchases intended to increase shareholder value or signal the
issuer's view that its stock is undervalued and those that instead were
at least, in part, ``potentially motivated by short-term attempts to
boost the share price'' or to achieve other inefficient objectives.\48\
In the case where repurchases may increase the value of managers'
compensation, for instance, one commenter stated that ``[enhanced]
disclosure is useful because it alerts the market to the possibility of
buybacks being at least partially influenced by the CEO's equity
sales.'' \49\ We agree and, with the benefit of the comments received
on the proposed amendments, continue to believe that an investor's
ability to assess the impact of a given repurchase depends in part on
having the information necessary to evaluate the purposes for which the
repurchase was undertaken.
---------------------------------------------------------------------------

    \47\ Proposing Release, supra note 2, at 8445.
    \48\ Proposing Release, supra note 2, at 8446 and 8457.
    \49\ See letter from Prof. Edmans.
---------------------------------------------------------------------------

    We understand that issuers may employ open-market stock repurchases
to credibly signal to investors the issuer's view of the stock's
fundamental value.\50\ The possibility that repurchases may be, in
part, motivated by goals unconnected to the issuer's fundamental value,
such as the manager's compensation or reputation or achieving
accounting metrics required by creditors or expected by analysts, would
reduce the credibility of such signals, even among issuers whose
repurchases are solely intended to signal management's view of the
issuer's value. Similarly, due to asymmetries in information between
the issuer and investors, investors cannot typically observe directly
whether a repurchase represented an efficient use of excess cash aimed
at increasing the issuer's value. Thus, the possibility that some
repurchases are motivated by reasons other than shareholder value
maximization complicates investor efforts to make this determination
absent additional information not currently required to be disclosed.
---------------------------------------------------------------------------

    \50\ See, e.g., Asquith, P. & Mullins, Jr. D.W., Signaling with
Dividends, Stock Repurchases, and Equity Issues, 15 Fin. Mgmt. 27,
33-34 (1986).
---------------------------------------------------------------------------

    Further, as we noted in the Proposing Release,\51\ and as described
above, there is evidence from which investors could reasonably conclude
that some repurchases are at least in part motivated by goals such as
executive compensation or achieving certain accounting targets. Thus,
as the Commission stated, ``it can be difficult for investors to
determine whether the undertaken repurchases were efficient and aligned
with shareholder value maximization, or were at least in part driven by
self-interested behavior of corporate insiders rather than shareholder
interest.'' \52\ Accordingly, we believe that investors should have
sufficient information about how issuers conduct repurchases to make
informed judgments about the likely purposes and effects of the
repurchases, including whether such repurchases provide credible
information about the value of the issuer.
---------------------------------------------------------------------------

    \51\ See Proposing Release, supra note 2, at 8444-8445.
    \52\ Proposing Release, supra note 2, at 8455.
---------------------------------------------------------------------------

    We acknowledge that many, perhaps even most, share repurchases are
not undertaken solely or primarily to benefit managers or to achieve
targets, such as those based on EPS. Indeed, as commenters noted,
Commission staff have previously assessed that it is ``unlikely'' that
a ``majority'' of repurchases are so motivated, and instead that
``most'' repurchases are consistent with shareholder value
maximization.\53\
---------------------------------------------------------------------------

    \53\ See, e.g., letters from Cato Institute (Apr. 1, 2022)
(``Cato''), Chamber II, Maryland State Bar Association (Apr. 5,
2022) (``Maryland Bar''), and National Association of Manufacturers
(Mar. 31, 2022) (``NAM'').
---------------------------------------------------------------------------

    That fact, however, does not aid investors who are attempting to
assess the efficiency of, and information conveyed by, any given
repurchase by a particular issuer.\54\ Given the opportunity for
repurchases to affect executive compensation or help an issuer to
achieve certain accounting measures, as well as the evidence that some
repurchases do so, investors cannot currently be certain that any given
repurchase in fact conveys information about the issuer's fundamental
value. Thus, as the Commission explained in the Proposing Release,
additional disclosures would, for example, ``help investors gauge
whether . . . repurchases may be motivated by price support for
insiders' sales of their securities, rather than conveying a true
signal of undervaluation.'' \55\ In this regard, we agree with the
observations of a commenter who compared this rationale to disclosure
requirements for potentially self-interested financial advisors where
disclosure allows a client to ``take into account the possibility of a
conflict.'' \56\
---------------------------------------------------------------------------

    \54\ See, e.g., letters from Better Markets (Apr. 1, 2022)
(``Better Markets I'') (noting that ``disclosures will help
investors identify `opportunistic' share repurchases designed
primarily to benefit management, not the company'') and Council of
Institutional Investors (Mar. 31, 2022) (``CII'') (stating the
amendments ``could strengthen the market's ability to assign premia
to companies that make capital allocation decisions optimizing the
company's long-term performance and assign discounts to companies
that do not'').
    \55\ Proposing Release, supra note 2, at 8457.
    \56\ See letter from Prof. Edmans (stating that this is similar
to how financial advisors must disclose the commission on products
that they are offering to their clients, such that, although the
product pays the highest commission to the advisor, it is also in
the best interest of the client, so there is no conflict, but the
disclosure is useful to allow the client to take into account ``the
possibility of'' a conflict).
---------------------------------------------------------------------------

    Further, even efficient repurchases have the potential to
negatively affect investor confidence. As we have described previously,
we are concerned that, in some cases, issuers may repurchase their
stock while the relevant decision makers are aware of material
nonpublic information.\57\ Because issuers are repurchasing their

own securities, asymmetries may exist between issuers and investors
with regard to information about the issuer and its future prospects.
Investors may be more reluctant to trade in the presence of such
informational asymmetries.\58\
---------------------------------------------------------------------------

    \57\ See Rule 10b5-1 Adopting Release, supra note 18, at 80362-
80363 and 80372.
    \58\ One commenter suggests that issuers undertake voluntary
arrangements that limit their ability to repurchase at a time the
relevant decision maker is aware of material nonpublic information,
and therefore that the threat of such trading should not serve as a
basis for the amendments. See letter from Securities Industry and
Financial Markets (Apr. 1, 2022) (``SIFMA II''). Other academic
research suggests, however, that some issuers conduct repurchases at
times they are likely to be aware of material nonpublic information
and earn average returns on their trades that are not achieved by
other traders. See 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
---------------------------------------------------------------------------

    \61\ Rule 10b-18 provides issuers with a safe harbor from
liability for manipulation under 15 U.S.C. 78i(a)(2) (``Exchange Act
section 9(a)(2)'') and 15 U.S.C. 78j(b) (``Exchange Act section
10(b)'') when they repurchase their common stock in the market in
accordance with the rule's manner, timing, price, and volume
conditions. The proposed disclosure would not provide a defense to
manipulative conduct for purchases that are not in fact eligible to
rely on the safe harbor.
---------------------------------------------------------------------------

    (6) The aggregate total number of shares (or units) purchased
pursuant to a plan that is intended to satisfy the affirmative defense
conditions of Rule 10b5-1(c).\62\
---------------------------------------------------------------------------

    \62\ The Commission adopted Rule 10b5-1 in 2000 to clarify the
meaning of ``manipulative or deceptive device[s] or contrivance[s]''
prohibited by Exchange Act section 10(b) and Rule 10b-5 with respect
to trading on the basis of material nonpublic information. See
Selective Disclosure and Insider Trading, Release No. 33-7881 (Aug.
15, 2000) [65 FR 51716 (Aug. 24, 2000)]. Rule 10b5-1(c) established
an affirmative defense to Rule 10b-5 liability for insider trading
in circumstances where it is clear that the trading was not based on
material nonpublic information and the trade was pursuant to a
binding contract, an instruction to another person to execute the
trade for the instructing person's account, or a written plan.
---------------------------------------------------------------------------

    The proposed amendments would also require an issuer to disclose
material errors or changes to

information previously reported on an amended Form SR, which the
Commission indicated would allow for timely and accurate disclosure the
day after execution of the share repurchase order, with the ability to
make corrections, if needed, in amended filings. Additionally, the
Commission proposed to require issuers to furnish, rather than file,
Form SR. As a result, issuers would not be subject to liability under
15 U.S.C. 78r (``Exchange Act section 18'') for the disclosure in the
form, and the information would not be deemed incorporated by reference
into filings under the Securities Act and thus would not be subject to
liability under 15 U.S.C. 77k (``Securities Act section 11''), unless
the issuer expressly incorporated such information.\63\
---------------------------------------------------------------------------

    \63\ In addition, by requiring the Form SR to be furnished, a
late submission of the form would not affect eligibility to use Form
S-3 or to file a short-form registration statement under General
Instruction A.2 of Form N-2. General Instruction I.A.3(b) to Form S-
3 requires that all reports required to be filed with the Commission
during the preceding 12 months have been filed; the same
requirements apply under General Instruction A.2 of Form N-2.
---------------------------------------------------------------------------

2. Comments on the Proposed Amendments
a. Comments on the Daily Share Repurchase Disclosure Requirement
    Although there was substantial opposition to the proposal,\64\
several commenters generally supported the proposed daily repurchase
disclosure.\65\ Some of the commenters that supported the proposed
amendments asserted that they would reduce information asymmetries
between issuers and investors,\66\ which would result in ``greater
confidence that they can find accurate, comprehensive information about
a security and the broader investment field.'' \67\ Other commenters
stated that daily disclosure of share repurchases would increase
transparency.\68\
---------------------------------------------------------------------------

    \64\ See, e.g., letters from American Bar Association, Federal
Regulation of Securities Committee (Apr. 13, 2022) (``ABA
Committee''); American Council of Life Insurers (Feb. 22, 2022)
(``ACLI''); ASA; Bank Policy Institute & American Bankers
Association (Apr. 1, 2022) (``BPI & Amer. Bankers Assoc.''); Cato;
Chamber II; Chevron Corporation (Mar. 31, 2022) (``Chevron'');
Coalition of Business Trades (Apr. 1, 2022) (``Coalition'');
Cravath, Swaine & Moore LLP (Mar. 31, 2022) (``Cravath''); Davis
Polk & Wardwell LLP (Mar. 28, 2022) (``Davis Polk''); DLA Piper LLP
(Apr. 1, 2022) (``DLA Piper''); Dow Inc. (Apr. 1, 2022) (``Dow'');
FedEx Corporation (Apr. 1, 2022) (``FedEx''); Fenwick & West LLP
(Mar. 31, 2022) (``Fenwick''); Guzman & Company (Mar. 28, 2022)
(``Guzman''); Home Depot, Inc. (Apr. 1, 2022) (``Home Depot''); HP
Inc. (Apr. 1, 2022) (``HP''); Institute for Portfolio Alternatives
(Mar. 28, 2022) (``IPA''); International Bancshares Corporation
(Apr. 1, 2022) (``IBC''); Jones Day (Mar. 31, 2022) (``Jones Day'');
Keith Paul Bishop, former California Commissioner of Corporations
(Apr. 6, 2022) (``Bishop''); Maryland Bar; NAM; Norfolk Southern
Corporation (Mar. 31, 2022) (``Norfolk Southern''); NYSE Group, Inc.
(Apr. 1, 2022) (``NYSE''); Paul, Weiss, Rifkind, Wharton & Garrison
LLP (Apr. 1, 2022) (``Paul Weiss''); Pennsylvania Chamber of
Business and Industry (Apr. 1, 2022) (``PA Chamber''); PNC Financial
Services Group (Mar. 30, 2022) (``PNC''); Profs. Lewis and White;
PSC; Quest Diagnostics (Apr. 1, 2022) (``Quest''); Shearman &
Sterling LLP (Apr. 1, 2022) (``Shearman''); SIFMA II; Simpson
Thacher & Bartlett LLP (Mar. 31, 2022) (``Simpson Thacher'');
Society for Corporate Governance (Apr. 1, 2022) (``SCG''); Sullivan
& Cromwell (Apr. 1, 2022) (``Sullivan''); T. Rowe Price (Mar. 30,
2022) (``T. Rowe Price''); Virtu Financial (Mar. 29, 2022)
(``Virtu''); Vistra Corp. (Apr. 1, 2022) (``Vistra''); and Wilson
Sonsini Goodrich & Rosati (Apr. 18, 2022) (``Wilson Sonsini'').
    \65\ See, e.g., letters from Alex Hanson-Michelson (Oct. 18,
2022) (``Hanson-Michelson''); Americans for Financial Reform
Education Fund et al. (Apr. 1, 2022) (``AFREF et al.''); Amy (Oct.
23, 2022) (``Amy''); Anonymous (Oct. 29, 2022) (``Anonymous V'');
Anonymous (Oct. 30, 2022) (``Anonymous VI''); Anonymous, Retail
Investor (Dec. 26, 2022) (``Anonymous VII''); Arun R. (Oct. 8, 2022)
(``Arun''); Better Markets I; Better Markets (Jan. 11, 2023);
BrilLiquid LLC (Apr. 1, 2022) (``BrilLiquid''); CalPERS; Calvin
Satterfield (Jan. 13, 2023) (``Satterfield''); CFA Institute; CII;
David B. (Oct. 9, 2022) (``David''); David Jaggard (Oct. 13, 2022)
(``Jaggard''); Richard L. Hecht, Adubon Consulting Group (Jan. 27,
2022) (``Hecht''); International Corporate Governance Network (Mar.
31, 2022) (``ICGN''); James Lutes (Jan. 10, 2023) (``Lutes''); James
Mahr (Oct. 8, 2022) (``Mahr''); Joe Hernandez (Oct. 30, 2022)
(``Hernandez''); Joseph Krugel (Oct. 30, 2022) (``Krugel''); Kayden
Fox (Oct. 8, 2022) (``Fox''); Lewis; Marc Pentacoff (Dec. 23, 2021)
(``Pentacoff''); Mike Kerr (Aug. 16, 2022) (``Kerr''); North
American Securities Administrators Association, Inc. (Apr. 1, 2022)
(``NASAA''); National Employment Law Project (Apr. 1, 2022)
(``NELP''); Oxfam America (Apr. 1, 2022) (``Oxfam''); Professor
Lenore Palladino, UMass Amherst (Mar. 30, 2022) (``Prof.
Palladino''); Prof. Jackson, Dr. Hu, and Dr. Zytnick; Public Citizen
(Apr. 1, 2022) (``Public Citizen''); Roosevelt Institute (Mar. 31,
2022) (``Roosevelt''); Stephen, Consultant (Dec. 29, 2022)
(``Stephen''); Stephane Mans (Jan. 12, 2023) (``Mans''); U.S.
Senators Marco Rubio and Tammy Baldwin (Apr. 1, 2022) (``Senators
Rubio & Baldwin''). Additionally, Form Letter A supported the
proposal.
    \66\ See, e.g., letters from CFA Institute and Lewis.
    \67\ See letter from Lewis.
    \68\ See, e.g., letters from Amy, Anonymous V, Anonymous VI,
Anonymous VII, Andrew (Dec. 26, 2022), Arun, CalPERS, David, D.L.
(Jan. 11, 2023), Fox, Hanson-Michelson, Hernandez, Jaggard, Kerr,
Krugel, Lutes, Mahr, Mans, Satterfield, and Stephen.
---------------------------------------------------------------------------

    Some commenters asserted that issuers would be able to comply with
the proposed requirement to provide daily repurchase disclosure one
business day after execution of an issuer's share repurchase order
because issuers already comply with these types of strict deadlines in
other markets, and section 16 insiders must report their purchases and
sales within two business days.\69\ Other commenters suggested that the
costs of the proposed amendments would be minimal,\70\ with one
commenter noting that, at most, the proposed amendments would be ``a
minor incremental administrative burden.'' \71\ Some commenters
indicated that the proposed amendments would enable the Commission to
determine issuers' compliance with the Rule 10b-18 safe harbor.\72\ One
form comment letter asserted that such daily disclosure would reduce
the amount of time that insiders know of a repurchase while other
investors remain ignorant and ``give the Commission the tools to
enforce existing laws.'' \73\
---------------------------------------------------------------------------

    \69\ See, e.g., letters from CalPERS and ICGN.
    \70\ See e.g., letters from Better Markets I, CFA Institute, and
Prof. Palladino (stating that the costs of daily reporting ``should
be minimal given the well-established regular reporting of other
financial metrics to the Commission, and the fact that companies are
already reporting aggregate stock buybacks data, which must be
determined from micro-level data'').
    \71\ See letter from CFA Institute.
    \72\ See, e.g., letters from NELP, Prof. Palladino, and
Roosevelt. These commenters were generally concerned about issuers
manipulating the market for their securities through buybacks
executed not in accordance with the Rule 10b-18 safe harbor.
    \73\ See letter from Form Letter A.
---------------------------------------------------------------------------

    Many commenters opposed the proposal due to the proposed
requirement that issuers provide daily repurchase disclosure one
business day after execution of an issuer's share repurchase order.\74\
Some of these commenters indicated that existing disclosure rules
require near real-time trading information only in situations involving
changes in corporate control or trading by insiders,\75\ and share
repurchase activity does not carry the same signaling value as those
situations.\76\ Other commenters asserted that the justification for
the one business day requirement is not

evident.\77\ A number of commenters asserted that the proposed
amendments would increase costs without a corresponding benefit.\78\
Some commenters suggested that daily repurchase disclosures could cause
investors to misinterpret an issuer's day-to-day changes in trading
activity,\79\ which could result in unjustified stock price volatility
\80\ or the disruption of confidential merger or acquisition
discussions.\81\ Additionally, although some commenters suggested that
investors might use daily disclosure data to identify the issuer's
trading strategies,\82\ other commenters observed that a move to
periodic reporting should substantially mitigate any such concern.\83\
---------------------------------------------------------------------------

    \74\ See, e.g., letters from ACCO Brands Corporation (Mar. 30,
2022) (``ACCO''), ACLI, ASA, Bishop, BPI & Amer. Bankers Assoc.,
Business Roundtable (Apr. 1, 2022) (``Business Roundtable''), Cato,
Chamber II, Chamber III, Chevron, Coalition, Cravath, Davis Polk,
DLA Piper, Dow, Ed Armstrong (Dec. 28, 2021) (``Armstrong''), Empire
State Reality Trust (Mar. 29, 2022) (``Empire''), FedEx, Guzman,
Hecht, Home Depot, HP, IBC, Jones Day, Kirkland & Ellis LLP (Apr. 1,
2022) (``Kirkland Ellis''), Maryland Bar, NAM, Norfolk Southern, NYC
Bar, NYSE, PA Chamber, Paul Weiss, Pay Governance (Jan. 24, 2022)
(``Pay Governance''), PNC, Profs. Lewis and White, Quest, SCG,
Shearman, SIFMA II, Simpson Thacher, Stephens, Stuart Kaswell, Esq.
(Mar. 18, 2022) (``Kaswell''), Sullivan, T. Rowe Price, Virtu,
Vistra, and Wilson Sonsini. One of these commenters stated that,
because investors only see earnings quarterly, management's attempt
to use repurchases to affect their pay would only been detected
quarterly, and daily disclosures would not help. See letter from
Profs. Lewis and White.
    \75\ See, e.g., letters from Davis Polk (stating that ``only in
cases involving potential changes in corporate control--where the
information called for by Schedule 13D is plainly necessary to allow
investors to make informed investment decisions--and in cases
involving trading by officers, directors and ten percent
shareholders, whose trading may signal changes in insider sentiment
and corporate prospects unknown to the public market'') and T. Rowe
Price.
    \76\ See letter from Davis Polk.
    \77\ See letters from Chamber II, NAM, and T. Rowe Price.
    \78\ See, e.g., letters from Armstrong, BPI & Amer. Bankers
Assoc., Business Roundtable, Cato, Chamber II, Coalition, Davis
Polk, DLA Piper, Dow, Guzman, Maryland Bar, Profs. Lewis and White,
Quest, SCG, T. Rowe Price, and Vistra. For example, commenters
claimed that daily disclosure could boost share price, resulting in
higher repurchase costs; push issuers to revise or abandon share
repurchase plans; cause issuers to substitute ASRs for daily
repurchases, which would increase costs and limit flexibility;
discourage stock-based compensation; deter potential capital
allocation decisions; burden personnel; and incentivize the use of
larger financial firms over smaller ones. See, e.g., letters from
Coalition, Davis Polk, DLA Piper, Guzman, Maryland Bar, Profs. Lewis
and White, Quest, SCG, T. Rowe Price, and Vistra.
    \79\ See, e.g., letters from Business Roundtable, Davis Polk,
Dow, FedEx, Home Depot, Kaswell, Profs. Lewis and White, NAM, PNC,
Quest, Shearman, SIFMA II, Simpson Thacher, T. Rowe Price, Wilson
Sonsini, and Vistra. For example, some of the commenters noted that
a benign halt in purchases could be misinterpreted as a signal that
the issuer has material nonpublic information or that the issuer has
lost confidence in the value of its stock. See, e.g., letters from
Business Roundtable, Davis Polk, Dow, Home Depot, NAM, Profs. Lewis
and White, Quest, SCG, Simpson Thacher, T. Rowe Price, and Vistra.
One commenter noted that misinterpretation risks are heightened for
financial services companies because a halt in their share
repurchases could be due to supervisory action by the Federal
Reserve or other regulators, but the issuer may be barred from
disclosing such action. See letter from PNC.
    \80\ See, e.g., letters from Cravath, Davis Polk, Profs. Lewis
and White, and SCG.
    \81\ See, e.g., letters from Davis Polk, PNC, SIFMA II, and
Sullivan.
    \82\ See letters from Home Depot and PNC.
    \83\ See letters from Cravath and Davis Polk.
---------------------------------------------------------------------------

    Several commenters claimed that daily disclosures would result in
an overload of information \84\ that would be too disaggregated for
retail investors to easily parse.\85\ Commenters also expressed the
view that hedge funds and other professional traders would leverage
daily repurchase information to exploit arbitrage opportunities \86\
and actually increase information asymmetry.\87\ Some commenters
asserted that we have failed to identify a ``market failure'' that
would justify additional disclosures and expressed the view that
information asymmetry is advantageous to markets because it
incentivizes some market actors to expend resources developing
information that would be relevant to an issuer's share price.\88\
---------------------------------------------------------------------------

    \84\ See, e.g., letters from Dow, Kirkland Ellis, NYSE, SCG, and
Vistra.
    \85\ See, e.g., letters from ACLI, Armstrong, ASA, Chevron,
Cravath, Dow, Guzman, Hecht, Home Depot, Jones Day, NYSE, PNC,
Profs. Lewis and White, Quest, SCG, Shearman, SIFMA II, and Simpson
Thacher.
    \86\ See, e.g., letters from ACCO, Armstrong, ASA, BPI & Amer.
Bankers Assoc., Business Roundtable, Cato, Chevron, Coalition,
Cravath, Davis Polk, DLA Piper, Dow, Empire, FedEx, Guzman, Home
Depot, HP, IBC, Jones Day, NAM, NYC Bar, Norfolk Southern, PA
Chamber, Paul Weiss, PNC, Profs. Lewis and White, Quest, Shearman,
SIFMA II, SCG, Simpson Thacher, Stephens, Sullivan, T. Rowe Price,
Vistra, and Wilson Sonsini. One commenter noted that sophisticated
investors already use their superior technology and resources, which
are not available to ordinary investors, to identify trading
opportunities and earn positive returns by processing the high-
frequency information available on Form 4. See letter from Profs.
Lewis and White.
    \87\ See, e.g., letters from NYSE and Profs. Lewis and White.
    \88\ See, e.g., letters from Chamber II and Profs. Lewis and
White.
---------------------------------------------------------------------------

    Several commenters asserted that the proposed daily repurchase
disclosures on Form SR may encourage issuers to act inefficiently to
mitigate the negative consequences of daily disclosure.\89\ Commenters
suggested that issuers may shift from more conservative daily dollar
cost averaging strategies to the more costly practice of effecting
larger repurchases on fewer days to avoid triggering speculation,
continue daily repurchases when it does not make financial sense to do
so, or limit their average daily trading volume to try to ensure that
sophisticated investors viewed the daily trades as immaterial, even if
a larger volume would be more beneficial to shareholders.\90\ One
commenter suggested that share repurchase disclosures are unnecessary
because, even if managers benefit from repurchases through an increased
share price, such an increase also benefits other existing
shareholders.\91\
---------------------------------------------------------------------------

    \89\ See, e.g., letters from Chevron, Davis Polk, DLA Piper,
Profs. Lewis and White, SIFMA II, and Sullivan.
    \90\ See, e.g., letters from ACCO, Armstrong, ASA, BPI & Amer.
Bankers Assoc., Business Roundtable, Cato, Chevron, Coalition,
Cravath, Davis Polk, DLA Piper, Dow, Empire, FedEx, Guzman, Home
Depot, HP, IBC, Jones Day, NAM, NYC Bar, Norfolk Southern, PA
Chamber, Paul Weiss, PNC, Quest, Shearman, SIFMA II, SCG, Simpson
Thacher, Stephens, Sullivan, T. Rowe Price, Vistra, and Wilson
Sonsini.
    \91\ See letter from Maryland Bar.
---------------------------------------------------------------------------

    Some commenters asserted that share repurchase information is not
meaningful to investors because investors have never asked for detailed
share repurchase information.\92\ One commenter stated that the
proposed amendments would interfere with a corporation's state law
duties by discouraging and deterring companies from undertaking
repurchases that they otherwise judge to be in shareholders'
interest.\93\ Another commenter asserted that the proposed amendments
would violate the First Amendment because the proposed amendments ``do[
] not acknowledge the compelled-speech burdens that come with a next-
day reporting regime.'' \94\
---------------------------------------------------------------------------

    \92\ See, e.g., letters from ACCO and Norfolk Southern. See also
letter from Profs. Lewis and White (stating that daily repurchase
data is generally immaterial to investors and that many issuers
already disclose completion or cancellation of open market
repurchase programs if they believe it is material).
    \93\ See letter from Cato.
    \94\ See letter from Chamber III.
---------------------------------------------------------------------------

    A number of commenters disputed the proposal's assertion that the
use of share repurchases may help some insiders achieve performance
targets.\95\ Several of these commenters \96\ cited the 2020 Staff
Study \97\ for support, particularly the study's statement that ``82%
of the firms reviewed either did not have EPS-linked compensation
targets or had EPS targets but their board considered the impact of
repurchases when determining whether performance targets were met or in
setting the targets.'' \98\ On the other hand, one commenter \99\
asserted that the proposal did not go far enough to address executive
compensation concerns and urged that the Commission revise Instruction
7 to 17 CFR 229.402(d) (``Item 402(d) of Regulation S-K'') to require
issuers to

disclose whether their repurchase plans triggered additional
compensation.
---------------------------------------------------------------------------

    \95\ See, e.g., letters from Bishop, Cato, Chamber II,
Coalition, Maryland Bar, PA Chamber, Pay Governance, Profs. Lewis
and White, SCG, T. Rowe Price, Virtu, and Vistra. But see letter
from Kaswell (stating that the proposal does not go far enough to
address executive compensation concerns and urged that issuers be
required to disclose whether their repurchase plans triggered
additional compensation). Additionally, commenters stated that the
proposal does not reflect the reality that many compensation plans
adjust for repurchases management could not use share repurchases to
inflate earnings because doing so would be thwarted by an issuer's
compensation committee and/or its investors. See, e.g., letters from
Chamber II and Profs. Lewis and White.
    \96\ See, e.g., letters from Bishop, Cato, Chamber II,
Coalition, Profs. Lewis and White, T. Rowe Price, Virtu, and Vistra.
    \97\ See 2020 Staff Study, supra note 27. See also infra note
383 and accompanying text.
    \98\ Id. at 42. Another commenter cited its own study showing
that total shareholder return and capital expenditure growth are
higher for companies with larger buybacks than for companies with
smaller buybacks and concluded that EPS-based incentive plans do not
encourage short-term gains at the expense of long-term performance.
See letter from Pay Governance.
    \99\ See letter from Kaswell.
---------------------------------------------------------------------------

    One commenter asserted that the amendments are contrary to the
Commission's prior statement to ``minimize the market impact of the
issuer's repurchases, thereby allowing the market to establish a
security's price based on independent market forces without undue
influence by the issuer.'' \100\ Several commenters asked the
Commission to adopt alternative methods and deadlines for issuers to
provide share repurchase disclosures. Some of these commenters
suggested that issuers should make their share repurchase disclosures
on Form 8-K if the repurchases exceed specified volume thresholds,\101\
such as one \102\ or two \103\ percent of the issuer's total
outstanding shares, or some other threshold.\104\ Other commenters
suggested extending the Form SR filing deadline to two days,\105\ ten
days,\106\ or one month after the trade,\107\ or one day after
settlement.\108\ A number of commenters recommended scaling back the
proposal by changing the deadline for the share repurchase disclosure
and the period that the disclosure would encompass.\109\ Commenters
suggested the following deadlines and periods:
---------------------------------------------------------------------------

    \100\ See letter from Chamber II (quoting 2003 Adopting Release,
supra note 5, at 64953).
    \101\ See, e.g., letters from ABA Committee, DLA Piper, Maryland
Bar, NYC Bar, NYSE, and Sullivan.
    \102\ See, e.g., letters from ABA Committee, DLA Piper, NYSE,
Maryland Bar, and Sullivan.
    \103\ See letter from Simpson Thacher.
    \104\ See letter from FedEx (suggesting that the amendments
replace the share repurchase disclosure on proposed Form SR with
disclosure on Form 8-K, but did not specify the trigger at which the
Form 8-K would be required).
    \105\ See, e.g., letters from CII and Philip Forbini (Jan. 11,
2023).
    \106\ See letter from Jones Day.
    \107\ See id.
    \108\ See letter from NASAA.
    \109\ See, e.g., letters from Anthem Advisors LLC (Dec. 19,
2022) (``Anthem Advisors''); Armstrong; BrilLiquid; Chamber II;
Cravath; DLA Piper; Guzman; Hecht; Home Depot; HP; Jones Day;
Charles Morris, Greenhouse Funds LLP (Dec. 16, 2021) (``Morris'');
NAM; Pentacoff; Quest; SCG; SIFMA II; Simpson Thacher; and Stephens.
Additionally, one commenter stated that, if the final amendments
include Listed Closed-End Funds, those funds should only be required
to provide daily information semi-annually in their Form N-CSR. See
letter from Investment Company Institute (Apr. 1, 2022) (``ICI I'').
---------------------------------------------------------------------------

     Quarterly reporting of daily data; \110\
---------------------------------------------------------------------------

    \110\ See letter from Jones Day (stating that the amendments
could achieve the same goals through quarterly disclosure of daily
data).
---------------------------------------------------------------------------

     Quarterly or monthly reporting of daily data; \111\
---------------------------------------------------------------------------

    \111\ See letter from Anthem Advisors (stating that requiring
daily disclosures in a single monthly or quarterly report listing
all transactions during the preceding period would be preferable
because it would more easily accessed in EDGAR and more easily
understood).
---------------------------------------------------------------------------

     Quarterly reporting of biweekly data or limited daily
information; \112\
---------------------------------------------------------------------------

    \112\ See letter from Home Depot (recommending, as an
alternative, supplementing current Item 703 disclosure with a list
of dates on which repurchases were made, without the daily volume).
---------------------------------------------------------------------------

     Monthly reporting of daily data; \113\
---------------------------------------------------------------------------

    \113\ See letter from Cravath (stating that monthly disclosure
of daily data would strike a better balance between the benefits of
the information and the negatives of abuse, noise, and the need to
correct failed trades).
---------------------------------------------------------------------------

     Monthly reporting of biweekly data; \114\
---------------------------------------------------------------------------

    \114\ See letter from Home Depot (offering this frequency and
period as an alternative to its prior recommendation of quarterly
reporting of biweekly data).
---------------------------------------------------------------------------

     Monthly reporting of monthly data; \115\ and
---------------------------------------------------------------------------

    \115\ See, e.g., letters from Armstrong, Chamber II, DLA Piper,
Guzman, HP, Morris, NAM, Quest, SCG, SIFMA II, Simpson Thacher, and
Stephens.
---------------------------------------------------------------------------

     Weekly reporting of weekly data.\116\
---------------------------------------------------------------------------

    \116\ See, e.g., letters from BrilLiquid, Guzman, Hecht, and
Pentacoff.
---------------------------------------------------------------------------

    Moreover, one commenter supported the proposal to allow Form SR to
be furnished to the Commission instead of filed, stating that
``inadvertently submitting incorrect data'' on the form should not
``automatically open the door'' to private litigation, particularly
section 11 claims,\117\ and another commenter suggested that the final
amendments include a safe harbor permitting issuers to correct Form SR
errors without liability within four business days of the end of the
calendar month in which corrections are identified.\118\ Some
commenters asked the Commission to provide more specificity around the
materiality standard governing amendments to Form SR, and recommended
either a three or five percent misstatement threshold.\119\ One
commenter disagreed with any materiality threshold, stating that such a
threshold would be more confusing than beneficial.\120\
---------------------------------------------------------------------------

    \117\ See letter from NASAA.
    \118\ See letter from Cravath.
    \119\ See, e.g., letters from Hecht and NASAA.
    \120\ See letter from ICGN.
---------------------------------------------------------------------------

b. Comments on Exemptions for Certain Issuers
    Several commenters discussed whether the Commission should exempt
certain categories of issuers from the amendments.\121\ Commenters were
split between their support for,\122\ and opposition to,\123\ exempting
FPIs from the proposed quantitative daily disclosure requirements. The
commenters that supported an exemption were generally concerned that
requiring FPIs to file Form SR would deviate from the Commission's
historic practice of deferring to an FPI's home country disclosure
requirements, and some claimed that applying the proposed amendments to
FPIs would subject them to multiple, differing disclosure regimes.\124\
---------------------------------------------------------------------------

    \121\ See, e.g., letters from ABA Committee, ACCO, Alternative &
Direct Investment Securities Association (Mar. 31, 2022)
(``ADISA''), Better Markets I, BPI & Amer. Bankers Assoc.,
BrilLiquid, Canadian Bankers Association (Mar. 31, 2022) (``CBA''),
CFA Institute, CII, Cravath, Hecht, IBC, ICGN, ICI I, Nareit (Mar.
31, 2022) (``Nareit''), NYC Bar, NYSE, Profs. Lewis and White,
Roosevelt, SIFMA II, Sullivan, Teachers Insurance and Annuity
Association of America (Apr. 1, 2022) (``TIAA''), TotalEnergies SE
(Apr. 1, 2022) (``TotalEnergies''), and Vereniging Effecten
Uitgevende Ondernemingen (Mar. 30, 2022) (``VEUO''). Additionally,
one commenter recommended exempting from the amendments repurchases
of an issuer's preferred stock. See letter from Vicki Owen (Jan. 19,
2023).
    \122\ See, e.g., letters from ABA Committee, CBA, Cravath, NYC
Bar, NYSE, SIFMA II, Sullivan, TotalEnergies, and VEUO.
    \123\ See, e.g., letters from Better Markets I, BrilLiquid, CFA
Institute, CII, Hecht, ICGN, and Roosevelt.
    \124\ See, e.g., letters from SIFMA II, TotalEnergies, and VEUO.
---------------------------------------------------------------------------

    One commenter asserted that applying the amendments to FPIs would
discourage foreign companies from listing on U.S. exchanges.\125\ Other
commenters requested that the Commission clarify that the final
amendments would not apply to Multijurisdictional Disclosure System
(``MJDS'') filers.\126\ Some commenters recommended that, at a minimum,
FPIs that are required to provide share repurchase information in their
home country disclosures, and include that information in their filings
on Form 6-K, should be exempt from the proposed quantitative daily
disclosure amendments.\127\ Some of these commenters indicated that
FPIs should not be required to disclose the total number of shares
repurchased in their home countries in reliance on the safe harbor in
Rule 10b-18 nor the total number of shares purchased pursuant to a plan
that is intended to satisfy the affirmative defense conditions of Rule
10b5-1(c) because that information is not likely to provide any
meaningful information to U.S. investors.\128\
---------------------------------------------------------------------------

    \125\ See letter from NYC Bar.
    \126\ See, e.g., letters from ABA Committee, BCE Inc. (Mar. 30,
2022), CBA, Jones Day, and Sullivan.
    \127\ See, e.g., letters from SIFMA II, Sullivan, and VEUO.
    \128\ See, e.g., letters from SIFMA II and VEUO.
---------------------------------------------------------------------------

    Most commenters that discussed the issue asserted that the final
amendments should not provide an exemption to smaller issuers.\129\
Nonetheless, one of these commenters recommended that, if the
Commission adopts a next-day reporting requirement, it should provide
smaller reporting companies

(``SRCs'') \130\ with additional time to furnish their Form SR.\131\
Another commenter suggested that smaller companies should have
simplified reporting requirements, such that they not be required to
provide their Form SR as frequently as other issuers.\132\ One
commenter recommended that SRCs' repurchase reporting threshold be
based on a five percent volume trigger.\133\ Other commenters, however,
asserted that applying the amendments to smaller issuers would be
onerous and unnecessary \134\ and would place an increased burden \135\
on those issuers.
---------------------------------------------------------------------------

    \129\ See, e.g., letters from ABA Committee, Better Markets I,
BrilLiquid, CFA Institute, Cravath, ICGN, and Hecht.
    \130\ ``Smaller reporting company'' is defined in Securities Act
Rule 405 and 17 CFR 240.12b-2 as an issuer that is not an investment
company, an asset-backed issuer (as defined in 17 CFR 229.1101), or
a majority-owned subsidiary of a parent that is not an SRC and that:
(1) Had a public float of less than $250 million; or (2) had annual
revenues of less than $100 million and either: (a) no public float;
or (b) a public float of less than $700 million.
    \131\ See letter from Cravath.
    \132\ See letter from Hecht.
    \133\ See letter from ABA Committee (explaining that ``[s]etting
the Form 8-K threshold at 5% of the total shares outstanding would
be consistent with how SRCs are treated with respect to disclosures
under current Item 3.02 for dilutive issuances in private
transactions,'' and that ``this accommodation would not result in a
meaningful loss of information to investors'').
    \134\ See letter from ACCO.
    \135\ See letter from Profs. Lewis and White.
---------------------------------------------------------------------------

    Additionally, one commenter recommended exempting issuers without
an established market for their securities because, in its view,
investors receive little informational value from this disclosure and
there is minimal risk of opportunistic repurchases in such cases.\136\
Another commenter recommended exempting publicly traded government
contractor companies.\137\ A few commenters suggested exempting
regulated banking institutions from the proposed amendments because
those issuers are already required to disclose their regulatory capital
requirements and capital planning process, so the repurchase
information in the proposed amendments would not be necessary for
investors.\138\ One of these commenters acknowledged that the
information required by banking regulators ``does not directly align
with the share-repurchase-specific disclosure the SEC is proposing to
require,'' though the commenter also asserted that such information
``nevertheless provides investors with insights into firms' capital
planning processes and actions.'' \139\
---------------------------------------------------------------------------

    \136\ See letter from Publix Super Markets, Inc. (Jan. 10, 2023)
(``Publix''). The commenter also notes that the Inflation Reduction
Act exempts such companies from the excise tax and, therefore,
asserts that a similar exemption should apply here.
    \137\ See letter from PSC. The commenter stated that that the
proposed daily reporting requirements would increase costs and offer
no identifiable benefit to publicly traded government contractor
companies because those firms are able to do business only with the
government, so their costs must be covered by their government
customers. As a result, adding the daily disclosure requirements to
these firms would make them less competitive and force them out of
the public markets.
    \138\ See, e.g., letters from BPI & Amer. Bankers Assoc. and
IBC.
    \139\ See letter from BPI & Amer. Bankers Assoc.
---------------------------------------------------------------------------

    Some commenters asserted that Listed Closed-End Funds \140\ should
be exempt from the proposed quantitative daily disclosure amendments
because, given the way the funds are structured, they believe that the
concerns motivating the proposal are absent. Other commenters disagreed
and asserted that Listed Closed-End Funds should be subject to the
final rule.\141\ In response to a request for comment about whether to
exempt, among other issuers, Listed Closed-End Funds from the
structured data requirement, one commenter suggested that there is a
link between having a lower public float and the likelihood of market
manipulation.\142\ Another commenter stated that many Listed Closed-End
Funds repurchase shares when the market price is below net asset value
(``NAV'') and/or to increase NAV for remaining shareholders, and that
given the close relationship between share purchases and NAV, it is
arguably more important for Listed Closed-End Funds to disclose
information regarding their planned and actual repurchase
activity.\143\ Other commenters indicated that the proposed amendments
should exempt trades associated with Rule 10b5-1 plans \144\ and
purchases made in reliance on the Rule 10b-18 safe harbor.\145\
---------------------------------------------------------------------------

    \140\ See, e.g., letters from ICI I and TIAA (suggesting that,
because executive compensation is generally not tied to share price
among closed-end funds, these issuers generally have little or no
incentive to misuse share repurchases). See also letter from
Investment Company Institute (Jan. 11, 2023) (asserting that,
because the Inflation Reduction Act exempted Listed Closed-End
Funds, the final amendments should do so too). Some commenters
suggested that the Commission should also exempt ``non-listed
funds'' from the proposed amendments. See letters from ADISA and
IPA. Both the proposed and final amendments, however, would only
apply to Listed Closed-End Funds.
    \141\ See letters from CFA Institute, XBRL US (Mar. 31, 2022)
(``XBRL US''), BrilLiquid, Hecht, and ICGN.
    \142\ See letter from XBRL US.
    \143\ See letter from CFA Institute.
    \144\ See letter from PNC.
    \145\ See, e.g., letters from HP and SCG.
---------------------------------------------------------------------------

c. Comments on Repurchases Intended To Satisfy Rule 10b5-1(c) and
Intended To Qualify for the Rule 10b-18 Safe Harbor
    Some commenters generally supported the requirements to disclose
whether repurchases were made pursuant to a Rule 10b5-1(c) plan, as
proposed.\146\ One commenter recommended requiring additional
disclosure regarding an issuer's Rule 10b5-1(c) plan, including
information on adoption, modification, suspension, or termination of
the plan; the maximum number of shares planned for sale under the plan;
and any suspensions or terminations of a planned repurchase pursuant to
such a plan.\147\ Some commenters supported the proposed disclosures
related to the Rule 10b-18 safe harbor, but recommended that the
Commission go farther by repealing Rule 10b-18 and replacing it with
bright-line limits.\148\ Another commenter generally supported the
proposed Rules 10b5-1(c) and 10b-18 disclosures, but indicated that
they should not be applied to FPIs.\149\
---------------------------------------------------------------------------

    \146\ See, e.g., letters from CFA Institute, CII, and SIFMA II.
    \147\ See letter from CFA Institute.
    \148\ See, e.g., letters from AFREF et al.; CFA Institute; CII;
Oxfam; Prof. Palladino; and William Lazonick & Ken Jacobson,
Academic-Industry Research Network (Apr. 1, 2022) (``Lazonick &
Jacobson'').
    \149\ See letter from SIFMA II.
---------------------------------------------------------------------------

    Other commenters opposed generally the requirements to disclose
repurchases intended to satisfy Rule 10b5-1(c) and intended to qualify
for the Rule 10b-18 safe harbor.\150\ One commenter disagreed
specifically with proposed Item 703(c)(2)(iii) and (c)(3)(v), which
would require disclosure of the terminations of Rule 10b5-1 trading
plans, or determinations not to make further purchases under a plan,
because that could lead to unfounded speculation about mergers and
acquisitions or other activities.\151\ Another commenter asserted that
requiring disclosure as to whether share repurchases were made in
reliance on the Rule 10b-18 safe harbor could cause a negative
inference against any issuer not relying on the safe harbor.\152\
---------------------------------------------------------------------------

    \150\ See, e.g., letters from Cravath, Dow, Maryland Bar, and
Sullivan.
    \151\ See letter from Sullivan.
    \152\ See letter from Maryland Bar.
---------------------------------------------------------------------------

d. Comments Concerning Requests for Clarification
    Some commenters asked the Commission to clarify certain aspects of
the proposed quantitative daily disclosures on Form SR.\153\ One of
these commenters asked the Commission to provide a more precise
definition of ``share repurchase program'' because the term is not
currently ``a legal term of

art,'' so different issuers may use the term differently.\154\ Other
commenters claimed that the proposed amendments were ambiguous as to
when a transaction would be considered ``executed,'' particularly in
the context of ASRs.\155\ One commenter recommended that the Commission
define the terms, ``business day'' and ``before the end,'' used in the
proposed amendments establishing the Form SR deadline.\156\ Another
commenter requested that the final amendments clarify whether withhold-
to-cover shares would be encompassed by the rule and recommended that
they not be included under any final rule.\157\ Some commenters claimed
that an end of next business day deadline would prejudice issuers on
the west coast,\158\ with one of the commenters pointing out that
``those making filings on Form 4 \159\ are provided not only with two
business days to report insider transactions that are significantly
less frequent than those which would be reported under Form SR, but
such filers are given until 10 p.m. Eastern Time to file.'' \160\
---------------------------------------------------------------------------

    \153\ See, e.g., letters from Chamber II, Bishop, Cravath, DLA
Piper, FedEx, HudsonWest LLC (Mar. 31, 2022) (``HudsonWest''),
Simpson Thacher, Thomas Nash (Oct. 12, 2022) (``Nash''), and Wilson
Sonsini.
    \154\ See letter from Cravath. The commenter suggested that
share repurchase program be defined as ``cash purchases by issuers
in the market for their own account and not for the purpose of
immediately delivering those shares to a third party in satisfaction
of a pre-existing obligation.'' Further, the commenter provided
certain items that should fall outside the definition, including:
(1) arrangements to acquire shares in the market to deliver to
shareholders participating in dividend reinvestment plans, to
employees participating in employee share purchase programs, or to
401(k) or other retirement accounts in satisfaction of ``stock
match'' commitments; (2) arrangements to facilitate the operation of
employee equity incentive plans; (3) self-tender offers; (4) net
share settlement and other transactions where a holder forfeits an
entitlement to an issuer's shares (e.g., in connection with an
option, or upon separation); and (5) cash settlement of transactions
that reference an issuer's shares, such as derivative transactions.
    \155\ See, e.g., letters from Chamber II, Cravath, DLA Piper,
FedEx, HudsonWest, Simpson Thacher, and Wilson Sonsini.
    \156\ See letter from Bishop.
    \157\ See letter from Nash.
    \158\ See, e.g., letters from Chevron and HP.
    \159\ 17 CFR 249.104.
    \160\ See letter from HP.
---------------------------------------------------------------------------

e. Other Comments
    A number of commenters asked the Commission to adopt additional
Form SR disclosure requirements that the Commission did not propose,
including the number of shares outstanding following the reported
transaction,\161\ the number of shares remaining to be purchased
pursuant to the current repurchase plan,\162\ and the highest and
lowest price paid per share.\163\ A form letter submitted by many
commenters recommended replacing the Rule 10b-18 safe harbor with a
bright-line rule and making stock repurchases beyond the bright-line
rule unlawful.\164\ The commenters also suggested a prohibition on
trading by insiders during repurchase announcements and executions of
repurchase trades within at least ten days of these events.
---------------------------------------------------------------------------

    \161\ See, e.g., letters from AFREF et al. and Pentacoff.
    \162\ See letter from CFA Institute.
    \163\ See letter from AFREF et al.
    \164\ See letter from Form Letter A.
---------------------------------------------------------------------------

    A few commenters suggested alternatives for the proposed Form SR
disclosures, such as requiring the information to be disclosed as part
of Item 703 of Regulation S-K,\165\ or providing interpretive guidance
to elicit the disclosure instead of revising the Commission's
rules.\166\ Some commenters recommended that, instead of the proposed
quantitative daily share repurchase disclosures, the Commission should
require disclosure about the effect of share repurchases on executive
compensation reported under 17 CFR 229.402 (Item 402 of Regulation S-
K).\167\ One commenter asserted that the effect of share repurchases on
executive compensation pertains to an issuer's corporate governance and
should be resolved by shareholders instead of the Commission.\168\
---------------------------------------------------------------------------

    \165\ See letter from SIFMA II.
    \166\ See letter from Profs. Lewis and White.
    \167\ See, e.g., letters from Maryland Bar and Profs. Lewis and
White.
    \168\ See letter from PA Chamber.
---------------------------------------------------------------------------

    With respect to the proposed requirement that Form SR disclose the
total number of shares purchased in reliance on Rule 10b-18, some
commenters suggested that issuers should only be required to disclose
whether a purchase ``was intended to comply'' with that safe harbor due
to interpretive legal questions and the speed at which market
quotations of stock prices can change.\169\ Some commenters asked the
Commission to include a phase-in period of nine to 12 months for any
final amendments that the Commission may adopt.\170\
---------------------------------------------------------------------------

    \169\ See, e.g., letters from SIFMA II and Sullivan.
    \170\ See, e.g., SIFMA II, Sullivan, and Wilson Sonsini.
---------------------------------------------------------------------------

3. Final Amendments
    We continue to believe that disclosure of issuers' total
repurchases made each day would benefit investors and markets. The
final amendments require the same additional detail regarding an
issuer's daily repurchase activity, as proposed. Moreover, to make this
information readily available for analysis, the final amendments
require that the share repurchase information that is disclosed be
reported using Inline XBRL, also as proposed.
    However, although the final amendments require daily repurchase
disclosure, as proposed, the final amendments require a different
deadline and manner of disclosure. In response to commenters'
objections, the final amendments do not require issuers to provide
their daily repurchase disclosure one business day after execution of
their share repurchase order.\171\ Rather, in a change from the
proposal, the final amendments require:
---------------------------------------------------------------------------

    \171\ As discussed above, see supra Section III.A.2.d., a number
of commenters requested that we clarify certain aspects of the
proposed amendments. See, e.g., letters from Chamber II, Bishop,
Cravath, DLA Piper, FedEx, HudsonWest, Nash, Simpson Thacher, and
Wilson Sonsini. As a result of the changes from the proposed
amendments to the final amendments, most of these requests are no
longer applicable. Those clarification requests still applicable for
the final amendments are addressed in the appropriate places in this
release.
---------------------------------------------------------------------------

     Corporate issuers that file on domestic forms to disclose
the total repurchases made each day for the quarter in an exhibit to
their Form 10-Q and Form 10-K (for their fourth fiscal quarter);
     Listed Closed-End Funds to disclose daily quantitative
repurchase data in their semi-annual and annual reports on Form N-CSR;
and
     FPIs reporting on the FPI forms to disclose daily
quantitative repurchase data at the end of every quarter in new Form F-
SR,\172\ which will be due 45 days after the end of each of the
issuer's fiscal quarters.\173\
---------------------------------------------------------------------------

    \172\ See supra note 24.
    \173\ The final amendments adopt new Rule 13a-21, as proposed,
which requires applicable FPIs to file a Form F-SR.
---------------------------------------------------------------------------

    After considering the comments, we believe that providing the same
detail as was proposed but on a less frequent basis would avoid many of
the costs that commenters noted while still providing important
disclosures that address the informational deficiencies in current
reporting that we have identified. Accordingly, the final amendments
require issuers to disclose their daily quantitative share repurchase
information periodically in quarterly or semi-annual reports
(``periodic reporting'') instead of requiring issuers to disclose it on
a daily basis, as proposed.
    Although periodic reporting of daily quantitative data will provide
less frequent repurchase disclosures to investors than would daily
reporting of that data, periodic reporting will still provide investors
with most of the benefits that daily reporting would offer, but at a
lower cost to issuers. In fact, the costs to issuers may be only
incremental because issuers are already reporting share repurchases by
month in their

periodic reports. Investors will be able to use the granular daily
quantitative data to evaluate an issuer's repurchases in more detail,
including in the context of other point-in-time disclosures, such as
executive compensation and financial statement disclosures.
    While this periodic reporting will, in most cases, result in daily
quantitative repurchase data that are available to investors later than
was proposed, investors may well find the disclosure more meaningful
when considered as part of the overall pattern of the issuer's
repurchases, because they will be able to evaluate the efficiency of
the share repurchases based on when the issuer repurchased its shares
and the issuer's stated reasons for doing so. Moreover, this periodic,
rather than daily, reporting should mitigate any concerns raised by
commenters about the potential misinterpretation of an issuer's day-to-
day changes in trading activity \174\ that could cause unjustified
stock price volatility \175\ or disrupt confidential merger or
acquisition discussions.\176\ Additionally, while some commenters
expressed concern that investors might use daily quantitative
disclosure data to gain insight into or identify the issuer's trading
strategies,\177\ as other commenters observed, the move to periodic
reporting should substantially mitigate any such concern.\178\
---------------------------------------------------------------------------

    \174\ See, e.g., letters from Business Roundtable, Davis Polk,
Dow, FedEx, Home Depot, Kaswell, Profs. Lewis and White, NAM, PNC,
Quest, Shearman, SIFMA II, Simpson Thacher, T. Rowe Price, Wilson
Sonsini, and Vistra.
    \175\ See, e.g., letters from Cravath, Davis Polk, Profs. Lewis
and White, and SCG.
    \176\ See, e.g., letters from Davis Polk, PNC, SIFMA II, and
Sullivan.
    \177\ See, e.g., letters from Home Depot and PNC.
    \178\ See, e.g., letters from Cravath and Davis Polk.
---------------------------------------------------------------------------

    We acknowledge, as a commenter observed, that periodic reporting
will provide information to the market more slowly than the two-
business day maximum delay associated with insider reporting of changes
in beneficial ownership on Form 4.\179\ While both issuer and insider
trades may reflect managers' views of an issuer's value, we recognize
that the much greater frequency of issuer trades pursuant to repurchase
plans relative to trades by individual insiders likely would result in
considerably more frequent reporting by issuers, and thus in greater
costs than those incurred by insiders reporting their transactions on
Form 4. In addition, because of this greater frequency of trading,
there would be a greater risk (as compared to insider transactions)
that daily reporting would allow other market participants to trade
strategically in response to issuer disclosures and greater potential
harm to investors as a result. Further, we believe that even with
periodic reporting investors will still be able to use periodic
reporting of daily repurchases to identify potentially opportunistic
behavior, and that issuers will take into account that likelihood when
determining their trading behavior.
---------------------------------------------------------------------------

    \179\ See letter from Roosevelt (asserting that the Commission
should adopt daily reporting ``for similar reasons that Form 4
requires daily disclosure'').
---------------------------------------------------------------------------

    The final amendments require daily share repurchase disclosure on a
quarterly basis in Forms 10-Q and 10-K (for the issuer's fourth fiscal
quarter) for corporate issuers reporting on domestic forms and on a
semi-annual basis in Form N-CSR for Listed Closed-End Funds.
Quantitative share repurchase disclosures, aggregated on a monthly
basis, are already required in those forms.\180\ The final amendments
require the disclosure of additional detail with respect to the
already-reported share repurchases. Therefore, investors should be
familiar with looking to these filings for repurchase information.
Moreover, this change should lessen the burden for issuers compared
with the proposal because they are accustomed to providing repurchase
information in these periodic filings. As one commenter noted, it would
be useful for the issuer's transactions to be disclosed in periodic
reports for ``the ease of use and access to information for those who
access EDGAR using the SEC website.'' \181\
---------------------------------------------------------------------------

    \180\ Due to the new daily quantitative repurchase disclosure
requirements, we are eliminating the current requirement to provide
quantitative share repurchase disclosures on a monthly basis because
it would be redundant. See infra note 218 and accompanying text.
    \181\ See letter from Anthem Advisors.
---------------------------------------------------------------------------

    Listed Closed-End Funds will be required to provide their daily
share repurchase disclosures on Form N-CSR on a semi-annual basis. Like
Forms 10-Q and 10-K, Form N-CSR currently requires the disclosure of
quantitative share repurchase disclosures on a semi-annual basis so
investors should likewise be familiar with looking in this filing for
repurchase information. We are subjecting Listed Closed-End Funds to
the final amendments because, although not all of the motivations for
corporate issuer share repurchases apply to them due to differences in
the business model and organizational structure of a fund as compared
to a corporate issuer, investors in Listed Closed-End Funds also will
benefit from the opportunity to evaluate the purposes, impacts, and
efficiency of share repurchases and to understand the impact of such
activity on the value of their investments. As one commenter observed
in opposing an exemption for Listed Closed-End Funds, this interest may
be particularly strong given the close relationship between share
repurchases and NAV, which the commenter believed made it arguably more
important for Listed Closed-End Funds to disclose quantitative and
qualitative information regarding planned and actual repurchases.\182\
Relatedly, absent the additional information required by the final
amendments--including daily quantitative repurchase data--it would be
difficult for investors in Listed Closed-End Funds to distinguish
between price movements that are attributable to repurchase activity as
opposed to other market activity impacting share price.\183\ Further,
as noted by another commenter, disclosure may be of particular
importance for issuers with lower floats, such as Listed Closed-End
Funds, because such issuers may face a greater likelihood that
repurchases will have a significant effect on share price.\184\
---------------------------------------------------------------------------

    \182\ See Letter from CFA Institute.
    \183\ See Proposing Release, supra note 2, at 8460-8461.
    \184\ See letter from XBRL US.
---------------------------------------------------------------------------

    The final amendments will require FPIs that report using the FPI
forms to provide disclosure of daily repurchase data on new Form F-SR,