[5] Press Release, Securities and Exchange Commission, SEC Announces Charges against Corporate Insiders for Violating Laws Requiring Prompt Reporting of Transactions and Holdings (Sep. 10, 2014).[6]Id.[7]See 15 U.S.C. § 78p(a)(1).[8]Id. § 78p(a)(3)(A)-(B).[9]Id.

Section 16(b) and Short-Swing Profit LiabilitySection 16(b) of the Securities Exchange Act of 1934 provides that an issuer, or a shareholder suing on an issuer’s behalf, may seek disgorgement of any profits realized from the purchase and sale of any equity security in the issuer within a six-month period by insiders—i.e. directors or officers—or 10% beneficial owners of the issuer. 15 U.S.C. § 78p(b). Short-swing trading covered by Section 16(b) is a strict liability offense and, unlike the general anti-fraud provisions of the Securities Exchange Act, does not require proof of actual abuse of insider information or intent to profit.

In Rubenstein v. Int’l Value Advisers, LLC, No. 19-560-CV, 2020 WL 2549507 (2d Cir. May 20, 2020), the United States Court of Appeals for the Second Circuit affirmed a district court’s decision holding that an investor was not a member of a “group” of corporate insiders for purposes of short-swing profit liability under Section 16(b) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. §78p(b). In affirming, the Second Circuit determined that the investor’s investment management agreement delegating discretionary authority to an advisor was not an agreement with the “issuer,” and that an investment advisor’s client does not become an insider group member simply because the advisor files a Schedule 13D.

In Rubenstein v. Int’l Value Advisers, LLC, No. 19-560-CV, 2020 WL 2549507 (2d Cir. May 20, 2020), the United States Court of Appeals for the Second Circuit affirmed a district court’s decision holding that an investor was not a member of a “group” of corporate insiders for purposes of short-swing profit liability under Section 16(b) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. § 78p(b). In affirming, the Second Circuit determined that the investor’s investment management agreement delegating discretionary authority to an advisor was not an agreement with the “issuer,” and that an investment advisor’s client does not become an insider group member simply because the advisor files a Schedule 13D.

On October 19, 2017, the United States Court of Appeals for the Second Circuit, in a summary order, affirmed dismissal of an action seeking disgorgement of alleged short-swing profits realized by Defendants Eminence Partners II, L.P. and related entities in connection with their sale of common stock in The Men’s Wearhouse, Inc. (“Men’s Wearhouse”) under Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78p(b). Morrison v. Eminence Partners II, LP, No. 17-843 (2d Cir. Oct. 19, 2017).

uer must disclose the following information for such repurchases in tabular form:Class of shares;Average price paid per share;Total number of shares repurchased (including number purchased as part of a publicly announced share repurchase plan);Aggregate remaining maximum number of shares or dollar value that can be repurchased under a publicly announced share repurchase plan;Total number of shares purchased on the open market; andTotal number of shares purchased which are intended to qualify for the Rule 10b-18 safe harbor and, separately, the total number of shares purchased under an issuer Rule 10b5-1 trading plan.Additionally, the issuer must also disclose via a footnote to the tabular disclosure the date of adoption or termination of any issuer Rule 10b5-1 trading plans. The newly required tabular disclosure must be tagged using Inline XBRL.Example of Tabular Disclosure Use the checkbox to indicate if any officer or director reporting pursuant to Section 16(a) of the Exchange Act (15 U.S.C. 78p(a)), or for foreign private issuers as defined by Rule 3b-4(c) (17 CFR 240.3b-4(c)), any director or member of senior management who would be identified pursuant to Item 1 of Form 20-F (17 CFR 249.220f), purchased or sold shares or other units of the class of the issuer’s equity securities that are registered pursuant to Section 12 of the Exchange Act and subject of a publicly announced plan or program within four (4) business days before or after the issuer’s announcement of such repurchase plan or program or the announcement of an increase of an existing share repurchase plan or program.Checkbox Requirement The Share Repurchase Rule would require issuers to include a checkbox preceding its tabular disclosure indicating whether certain officers or directors traded in the relevant securities within four business days before or after the announcement of the share repurchase plan (or announcement of an increase to an existing share repurchase plan). This requirement may help investors eval

In Roth v. Foris Ventures, LLC, Nos. 22-16632, 22-16633, 2023 U.S. App. LEXIS 30081 (9th Cir. Nov. 13, 2023), the United States Court of Appeals for the Ninth Circuit partially reversed the dismissal of a shareholder derivative suit seeking to recover disgorgement of short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. §78p(b). The three-judge panel held that the district court erred in holding that the company’s board was required to approve the stock sale transactions for the specific purpose of exempting it from Section 16(b) liability pursuant to Securities and Exchange Commission (“SEC”) Rule 16b-3(d)(1).The Court’s decision provides a board of directors with more latitude to approve securities transactions by Section 16 reporting persons without risk of liability under the short-swing profits rule.Short-swing profits occur when a company insider buys and sells stock within a six-month period. Section 16(b) imposes liability for such trading practices based on the theory that company insiders are presumed to have material, nonpublic information during such short periods.Under Section 16(b), shareholders may file suit on behalf of the company for disgorgement to the company of the profits derived from these transactions. However, SEC Rule 16b-3 exempts liability under Section 16(b) when an issuer’s boar

r issuers in the fiscal 2024 Form 10-K, issuers should review their existing practices relating to their repurchase plans and programs.Reassess reporting systems and disclosure controls and procedures surrounding repurchases, both internally and with the issuer’s broker.Issuers should review their current reporting systems and disclosure controls and procedures, and evaluate what revisions are needed (if any) to track and report repurchase information on a daily basis, and to comply with the enhanced disclosure requirements under amended Item 703 of Regulation S-K. Both the issuer’s internal treasury department and the external broker conducting repurchases should be involved in this reassessment.For more information on these rules or any related matter, please contact any member of the firm'spublic company representationpractice.AppendixISSUER PURCHASES OF EQUITY SECURITIESUse the checkbox to indicate if any officer or director reporting pursuant to Section 16(a) of the Exchange Act (15 U.S.C. 78p(a)), or for foreign private issuers as defined by Rule 3b-4(c) (§ 240.3b-4(c) of this chapter), any director or member of senior management who would be identified pursuant to Item 1 of Form 20-F (§ 249.220f of this chapter), purchased or sold shares or other units of the class of the issuer’s equity securities that are registered pursuant to section 12 of the Exchange Act and subject of a publicly announced plan or program within four (4) business days before or after the issuer’s announcement of such repurchase plan or program or the announcement of an increase of an existing share repurchase plan or program.[1] FPIs will be required to comply with the new disclosure and tagging requirements beginning with the Form F-SR that covers the first full fiscal quarter that begins on or after April 1, 2024. The Form F-SR is due 45 days after the end of an FPI’s fiscal quarter. The Form 20-F narrative disclosure (and tagging) that relates to the Form F-SR filings will be required beginning in t

hare repurchases, they might now also be subject to multiple, differing or even conflicting disclosure regimes.Board approvals of share repurchase programs should contemplate the final rules. Given the expanded disclosure requirements regarding an issuer’s rationale for each repurchase plan or program, and the process or criteria used to determine the amount of repurchases, the board of directors should consider these issues and think about documenting such consideration in the resolutions or minutes when approving a share repurchase program. In addition, management responsible for a company’s SEC disclosures should review the resolutions and/or minutes from the applicable board meeting when crafting the required disclosure to ensure it is accurate and supported by the company’s records.Exhibit: Tabular disclosure of daily repurchase dataIssuer purchases of equity securitiesUse the checkbox to indicate if any officer or director reporting pursuant to Section 16(a) of the Exchange Act (15 U.S.C. 78p(a)), or for foreign private issuers as defined by Rule 3b-4(c) (§ 240.3b-4(c) of this chapter), any director or member of senior management who would be identified pursuant to Item 1 of Form 20-F (§ 249.220f of this chapter) purchased or sold shares or other units of the class of the issuer’s equity securities that are registered pursuant to section 12 of the Exchange Act and subject of a publicly announced plan or program within four (4) business days before or after the issuer’s announcement of such repurchase plan or program or the announcement of an increase of an existing share repurchase plan or program.(a)(b)(c)(d)(e)(f)(g)(h)(i)Execution dateClass of shares (or units)Total number of shares (or units) purchasedAverage price paid per share (or unit)Total number of shares (or units) purchased as part of publicly announced plans or programsAggregate maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the publicly announced plans or pro

688 (Feb. 15, 2022).[3] Wilson Sonsini is pleased to have commented on the proposed rules and that its comments appear to have helped inform the final rules.[4] The final rules provide that a modification or change to the amount, price, or timing of the purchase or sale of securities will be deemed a termination of the existing plan and adoption of a new plan, and thus would trigger a new cooling-off period. See new Rule 10b5-1(c)(1)(iv). This new rule is discussed in more detail later in this alert.[5] For example, if a Rule 10b5-1 trading plan is adopted during the second fiscal quarter following the announcement of the first fiscal quarter results, then the first trade may not occur until two business days following the filing of the Form 10-Q for the second fiscal quarter.[6] See new Rule 10b5-1(c)(1)(ii)(D)(3).[7] See new Rule 10b5-1(c)(1)(ii)(D)(3) and Rule 10b5-1(c)(1)(ii)(E).[8] See Section 16(a)(1) of the Securities Exchange Act of 1934, as amended (Exchange Act), codified at 15 U.S. Code § 78p(a)(1).[9] Exchange Act Rule 16a-1(f) defines “officer” as “anissuer's president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of theissuerin charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for theissuer. Officers of theissuer's parent(s) or subsidiaries shall be deemed officers of theissuerif they perform such policy-making functions for theissuer. In addition, when theissueris a limited partnership, officers oremployeesof the general partner(s) who perform policy-making functions for the limited partnership are deemed officers of the limited partnership. When theissueris a trust, officers oremployeesof the trustee(s) who perform policy-making functions for the trust are deemed officers of the trust.”[10] For foreign private