On November 22, 2023, the U.S. Securities and Exchange Commission (SEC) issued an order postponing the effective date (the “Postponement”) of the Share Repurchase Disclosure Modernization rule (the “Repurchase Rule”), which became effective on July 31, 2023.[1] The Repurchase Rule was discussed in our previous client alert. As a result of the Postponement, the Repurchase Rule is stayed pending further SEC action. Accordingly, issuers will not need to comply with the Repurchase Rule until the SEC takes further action with respect to the rule.

The Postponement comes in response to the Fifth Circuit Court of Appeals holding that the Repurchase Rule was arbitrary and capricious and in violation of the Administrative Procedures Act when the SEC failed to respond to the U.S. Chamber of Commerce’s comments and failed to substantiate the benefits of the Repurchase Rule. The Fifth Circuit Court of Appeals remanded the Repurchase Rule to the SEC “to correct the defects” by November 30, 2023. The Fifth Circuit Court of Appeals did not stay the Repurchase Rule or otherwise change the deadline for compliance with the Repurchase Rule.

Next Steps

Although the Fifth Circuit Court of Appeals remanded the Repurchase Rule to the SEC “to correct the defects” by November 30, 2023, we believe it is unlikely the SEC will correct the defects by the deadline, and we expect the plaintiffs to file a motion to vacate soon thereafter. We are continuing to monitor developments and will provide additional information as it becomes available.

[1] Release No. 34-97424, Share Repurchase Disclosure Modernization (May 3, 2023) (Adopting Release).

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