Share Repurchase Disclosure Amendments – Form 20F in Spotlight
In a previous blog, SEC Proposes New Share Repurchase Disclosure Rules; we elaborated on the recent amendments to share repurchase disclosure rules adopted by the SEC. With the regulatory body actively working on modernizing the reporting ecosystem, many legacy methods of filing compliance reports are being replaced by iXBRL reporting. Hence, the SEC has mandated amendments requiring public companies to disclose deeper details about their share repurchases and to tag those disclosures in Inline XBRL.
About the amendments
The amendments call for a significant increase in disclosure requirements, including:
(i) disclosure of daily repurchase activity every quarter;
(ii) a new checkbox disclosure indicating if certain directors or officers traded in the relevant securities
(iii) narrative disclosure regarding the repurchase program, including its objectives and rationale; and
(iv) quarterly disclosures regarding the issuer’s adoption or termination of any Rule 10b5-1 trading arrangements.
These enhanced disclosure requirements are aimed at letting investors get a clearer picture and arrive at informed decisions about the purposes and effects of share repurchases.
While we threw light on how these changes may affect Forms 10K and 10Q in our previous article What’s Changing in Forms 10-K and 10-Q?, we will be expanding on the rules pertaining to requirements for narrative disclosures about repurchases in Regulation S-K, Form 20-F, and Form N-CSR.
Elements to be disclosed
The amendment to the Disclosure of Repurchase Program and Practices requires an issuer to disclose the following information:
- The objectives or rationales for each repurchase plan or program and the process or criteria used to determine the amount of repurchases;
- The number of shares purchased other than through a publicly announced repurchase plan or program and the nature of the repurchase transactions.
- Information about 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 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 before expiration, or under which the issuer does not intend to make further purchases; and
- Any policies and procedures relating to purchases and sales of the issuer’s securities by its officers and directors during a repurchase program, including whether there are any restrictions on such transactions.
The amendments about Disclosures Regarding Director and Officer Trading Activity require the following disclosures:
- Include a checkbox above the tabular disclosures indicating whether officers and directors subject to the Exchange Act Section 16(a) reporting requirements for domestic issuers and listed closed-end funds or their directors and members of senior management who would be identified under Item 1 of Form 20-F for FPIs, purchased or sold shares or other units of the class of the issuer’s equity securities within four business days before or after the issuer’s announcement of such repurchase plan or program or the announcement of an increase of an existing share repurchase plan or program.
Domestic issuers must comply with the amended rules beginning with the filing that covers the first full fiscal quarter that begins on or after October 1, 2023. FPIs will be required to comply by filing a new quarterly Form F-SR related to the first full fiscal quarter that begins on or after April 1, 2024. Narrative disclosures related to filed Form F-SRs will be required in the following Form 20-F.
To comply with the amendments, issuers should review and, if necessary, update their processes and controls to obtain the required information, such as tracking daily share repurchase activity and trades made by directors and officers close in time to the announcement of a share repurchase plan. FPIs should consider changes to their disclosure controls to meet the new quarterly disclosure and tagging requirements on the new Form F-SR.
What you should do?
Therefore, you must reassess how to prepare iXBRL reports and consider taking the help of a reliable provider for SEC iXBRL tagging services. If you don’t have one already, you should research iXBRL software for SEC filing – it saves you time and effort and ensures you never have to pay a penalty.
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