On December 19, a Fifth Circuit panel pulled the plug on the SEC’s Share Repurchase Disclosure Modernization rule, issuing an opinion vacating the rule. On Friday last week, Corp Fin announced that, yes, the rule had been vacated and, in case you were wondering, “the disclosure requirements revert to those in effect prior to the Final Rule’s effective date.” It remains to be seen whether the SEC will repropose new rules on this topic or has its hands full with other stuff—like climate disclosure—and so will just let this one lie.
You might recall that, in May 2023, the SEC adopted final rules intended to modernize and improve disclosure regarding company stock repurchases. The rule required quarterly reporting of detailed quantitative information on daily repurchase activity and revised and expanded the narrative requirements, including disclosure regarding the rationale for the buyback. (See this PubCo post.) Just over a week following adoption, the U.S. Chamber of Commerce, along with two Texas co-plaintiffs, submitted a petition to the Fifth Circuit for review of the final rule. Petitioners made various arguments, but the one that persuaded the Court was petitioners’ contention that the SEC violated the APA by acting arbitrarily and capriciously when it failed to “respond to petitioners’ comments about the agency’s economic implications analysis adequately,” and failed to “substantiate the proposed rule’s benefits adequately.”
On October 31, the Fifth Circuit issued its opinion in Chamber of Commerce of the USA v. SEC, granting the Chamber’s petition for review. The Court held that the “SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.” However, recognizing that there was “at least a serious possibility that the agency will be able to substantiate its decision given an opportunity to do so,” the Court allowed the SEC 30 days “to remedy the deficiencies in the rule,” setting the deadline at November 30, 2023. On November 22, the SEC announced that it had issued an order postponing the effective date of the rule and, on the same date, the SEC filed a brief motion asking the Court for an extension of time to correct the defects. In its motion, the SEC said only that, “[s]ince the remand, the Commission’s staff has worked diligently to ascertain the steps necessary to comply with the Court’s remand order and has determined that doing so will require additional time.” The SEC said in the motion that it would provide an update within 60 days on the status of its efforts. Not surprisingly, the Chamber opposed the motion. On November 26, the Court issued an Order, refusing to grant the extension, and on December 1, at the request of the Clerk of the Court, the SEC’s Office of General Counsel submitted a letter to the Court advising that the SEC would not be able to correct the defects by the Court-imposed deadline. (See this PubCo post, this PubCo post, this PubCo post and this PubCo post.) On December 7, the Chamber filed a motion to vacate the SEC’s final share repurchase rule. As recounted by the Chamber, the SEC advised the Chamber that it took no position on the Chamber’s motion. Then in December, the Court finally pulled the plug, issuing an opinion vacating the repurchase rule.
Given that the rule has now been vacated, Corp Fin has posted, for the convenience of issuers and others, the prior, now current, disclosure requirements:
Item 703 of Reg S-K
