Fifth Circuit Directs SEC To Correct Defects In Share Repurchase Disclosure Rules

OVERVIEW

On October 31, 2023, the Fifth Circuit Court of Appeals held that the Securities and Exchange Commission (SEC) acted arbitrarily and capriciously, in violation of the Administrative Procedures Act (APA), when it failed to respond to petitioners' comments and failed to conduct a proper cost-benefit analysis in connection with the adoption of rules requiring issuers to disclose share repurchase activity and the reasoning as to why the issuer repurchased its own shares.

So far, the court has not vacated the rule entirely; rather, it remanded the matter, directing the SEC to correct the defects in the rule within 30 days of the remand. The court retains jurisdiction to review the SEC's actions on remand.