75 PRACTICAL CONSIDERATIONS Companies may be more reluctant to rely on Rule 10b5-1(c) and Rule 10b18, or may want to give closer consideration to their decisions with respect to reliance on the affirmative defense and/or the safe harbor. The adopting release notes concerns expressed by commenters regarding disclosures relating to reliance by issuers on the affirmative defense and the safe harbor leading to speculation or cause for negative inference; however, in the adopting release, the SEC states, “we believe that any unwarranted inferences from disclosure that an issuer did or did not use such safe harbor or defense would be limited.” Certainly, going forward, there will be closer scrutiny, whether or not warranted (including from plaintiffs’ law firms) of specific buyback decisions, as well as of the use of trading plans. Companies should begin preparing disclosure controls to implement the new buyback disclosure requirements. For example, companies need to have a process in place to gather and maintain buyback information to be presented in the required tabular daily buyback disclosure. It would be useful for companies to prepare this buyback disclosure information throughout the particular quarter to allow time for the report to be accurately gathered from brokers and then compiled and checked. Similarly, companies will need a process to assess the narrative buyback disclosure, keeping in mind that objectives and rationales may change from filing to filing based on circumstances impacting the period. Companies will want to consider carefully the degree of detail that they choose to include in their filings regarding their buyback strategies and the alternatives to buybacks that may have been employed, as discussed below. In addition, there should be disclosure controls in place with respect to the checkbox for director and officer trades within four business days before or after the announcement of a share repurchase program or an increase to a share repurchase agreement, which should include reviewing Section 16 reports and/or obtaining representations and assessing whether such reliance is reasonable. For FPIs, implementing a process with respect to obtaining director, officer and senior management certifications may be more challenging. The policies also will require addressing the recordkeeping requirements. The Amendments do not require that company insider trading policies contain any specific restrictions, but they do require narrative disclosure of any policies and procedures relating to purchases and sales of the company’s securities by its officers and directors during a company buyback program, including any restrictions on such transactions. Because of this disclosure requirement, some companies may consider the circumstances under which to permit officers and directors to trade in company shares
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