Pulling Back The Curtain - SEC Proposes Expanded Share Repurchase Disclosures

Last week, the Securities and Exchange Commission proposed rule amendments that would enhance issuer disclosures regarding their share repurchase transactions.

The proposed rule changes consist of two components, namely:

1.  A proposed requirement that issuers file a new "real time" Form SR to report their repurchases much more frequently than they currently do in the periodic reports that they file with the SEC pursuant to Rule 703 of Regulation S-K; and
2.  Proposed changes to Rule 703 itself to require more disclosure in 10-Qs and 10-Ks about issuer repurchase activity.

The more frequent and detailed disclosures are designed to lessen the disparity between the information that is known to issuers and their insiders, on the one hand, and investors, on the other.  In addition, the proposals respond to commentators' concerns that repurchases may be used by issuers for earnings management or as a mechanism to increase executive compensation that is tied to share