Fifth Circuit Court of Appeals Vacates U.S. SEC Share Repurchase Rule

On December 19, 2023, the Fifth Circuit Court of Appeals issued an opinion and judgment vacating (the “Judgment”) the U.S. Securities and Exchange Commission’s (SEC) Share Repurchase Disclosure Modernization rule (the “Repurchase Rule”), which became effective on July 31, 2023.[1] The Repurchase Rule was discussed in our previous client alert. As a result of the Judgment, public companies do not need to comply with the disclosure requirements of the Repurchase Rule.

The Judgment comes in response to the Fifth Circuit Court of Appeals holding that the Repurchase Rule was arbitrary and capricious and in violation of the Administrative Procedures Act when the SEC failed to respond to the U.S. Chamber of Commerce’s comments and failed to substantiate the benefits of the Repurchase Rule. The Fifth Circuit Court of Appeals remanded the Repurchase Rule to the SEC “to correct the defects” within 30 days. On November 22, 2023, the SEC issued an order postponing the effective date of the Repurchase Rule and sought an extension of the 30-day period, which was ultimately denied by the Fifth Circuit Court of Appeals. The postponement of the Repurchase Rule was discussed in our previous client alert.

Next Steps

At this stage, it is unclear whether the SEC will appeal the Judgment, re-propose the Repurchase Rule or propose a rule similar to it, or take no action in response to the Judgment. We are continuing to monitor developments and will provide additional information as it becomes available.

[1] Release No. 34-97424, Share Repurchase Disclosure Modernization (May 3, 2023) (Adopting Release).