Davis Polk partner Joe Hall discussed with The Deal new rules adopted by the SEC on May 3 that require more detailed disclosures on share repurchases by insiders. Addressing the potential for the new rules to reveal confidential information about dealmaking activity before companies announce a merger, Joe explained that the deadline for filing quarterly reports is 40 days after the quarter ends, which gives companies some time to potentially complete merger negotiations before revealing their daily buyback activity. But, Joe said, in some cases companies may still have to disclose a pause in buybacks related to private deal negotiations that were never revealed.

He explained, “There are some events where a company needs to be in quiet mode for weeks at a time and you still run the risk of disclosing that at some point in time there was material information. If in a quarterly report you have a 20-day period where there was a pause in purchases as the company was negotiating a deal that never was announced, you have to throw that out into the market with no explanation of it. Nobody is going to want to say we were negotiating a material deal and weren’t able to close it.”

New Buyback Reporting Rules May Expose Deal Talks,” The Deal (May 12, 2023) (subscription required)