On December 7, 2022, the US Securities and Exchange Commission (SEC) issued a release (New Reopening Release), reopening the comment period on the share repurchase disclosure modernization rule changes that it proposed on December 15, 2021 (Share Repurchase Proposal). At the same time, the SEC made available a memorandum prepared by the staff of the SEC’s Division of Economic and Risk Analysis (Staff Memorandum), discussing potential economic effects of the 1% excise tax on certain share repurchases imposed by the Inflation Reduction Act of 2022 (Inflation Reduction Act), that may be helpful in evaluating the Share Repurchase Proposal. The SEC reopened the comment period to allow interested persons to analyze and comment on the Staff Memorandum.

The New Reopening Release represents the second time in less than a year that the SEC reopened the comment period on the Share Repurchase Proposal. In October 2022, the SEC reopened the comment period on the Share Repurchase Proposal, along with a number of other pending proposals, due to technical error in receiving certain comments.  That comment period closed on November 1, 2022. 

The New Reopening Release requested comments in 8 areas involving the Staff Memorandum and the excise tax, but it did not limit comments to those topics.  The New Reopening release encouraged interested parties to submit comments regarding the proposed amendments, specific issues discussed in the New Reopening Release, the Staff Memorandum or the proposing release, and other matters that may have an effect on the proposed amendments.  

The new comment period closes 30 days after publication of the New Reopening Release in the Federal Register. While the comment period is extended, it is still a very short time period, especially since it coincides with the holiday season.  SEC Commissioner Uyeda released a statement on the reopened comment period, disagreeing with the 30-day length of the period.  He asserted that a comment period should be viewed as a “vital component of a discussion between an administrative agency and the public in order to better understand the effects of a proposed rule, especially under a changed factual scenario” and that a “longer period, such as 45 days, would increase the likelihood that the Commission receives more thoughtful responses.”

Background

The Share Repurchase Proposal was intended to improve the quality, relevance, and timeliness of information related to company share repurchases, including by requiring daily repurchase disclosure on a new Form SR, due one business day after execution of a company’s share repurchase order, and to require additional detail regarding the structure a company’s repurchase program and its share repurchases. For additional information on the Share Repurhase Proposal, see our Legal Update, “SEC Proposes New Share Repurchase Disclosure Rules,” dated December 20, 2021.

The Inflation Reduction Act was signed into law in August 2022, after the Share Repurchase Proposal was published for public comment.  In September 2022, the US Chamber of Commerce commented that the SEC needed to redo its cost-benefit analysis of the Share Repurchase Proposal in light of the Inflation Reduction Act’s new excise tax on buybacks and then provide an appropriate opportunity for the public to comment on that analysis before the rule is finalized.

Practical Considerations

The New Reopening Release provides interested parties with another chance to provide input on, and perhaps influence, the Share Repurchase Proposal before it is finalized. The Staff Memorandum will likely inform the economic analysis that would serve as the justification for any final rule. Having this opportunity to review, consider and respond to this presentation at this time can be very helpful to interested parties that may be impacted by new and amended share repurchase disclosure requirements.  

Because the new comment period will close 30 days after publication in the Federal Register, interested persons should start reviewing the Staff Memorandum and thinking about possible comments right away.

Previously-submitted comments do not have to be re-submitted.

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