It seems like it was just the other day that we reported on the ongoing saga of the SEC’s share repurchase rules – possibly because it WAS just the other day. Given the posture of the litigation seeking to invalidate the rules, we regretfully ended with some cliffhangers. Would the rules be vacated? Would the SEC do so voluntarily, or would it fight the motion brought by the plaintiffs to vacate the rules?
The other shoe has now dropped. Specifically, on December 20, 2023, the U.S. Court of Appeals for the Fifth Circuit vacated the rules. In doing so, the Court said, among other things, that the “rule remains no less flawed – and no less unlawful – than it was on October 31, 2023”; aside from being Halloween, that was the date on which the Court remanded the matter back to the SEC to correct the deficiencies in the rules.
As a result, the new rules are now non-rules, and companies that were planning to include the disclosures in their upcoming 10-K filings will not be required to do so. Which leads to a different set of cliffhangers – will the SEC repropose the rules? If so, will those rules be identical to the newly vacated ones, except for a more robust cost-benefit analysis?
However, the biggest cliffhanger may be whether companies decide to provide some – if not all – of the disclosures that would have been required under the rules. For example, companies may consider it advisable to provide disclosure concerning the rationale behind share repurchases, even if they disregard the requirement – which struck us as silly or worse – to provide detailed information about share repurchases on a daily basis.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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