As expected, at an open meeting today, the SEC adopted (on a unanimous vote) the final Rule 10b5-1 and insider trading rules.
The SEC's Fact Sheet highlights these and other key aspects of the rule:
- A cooling-off period for directors and officers of the later of: (1) 90 days following plan adoption or modification; or (2) two business days following the disclosure in certain periodic reports of the issuer’s financial results for the fiscal quarter in which the plan was adopted or modified (but not to exceed 120 days following plan adoption or modification) before any trading can commence under the trading arrangement. This compares favorably to the 120-day cooling-off period included in the proposing release.
- A cooling-off period of 30 days for persons other than issuers or directors and officers before any trading can commence under the trading arrangement or modification. This reflects a positive change from the proposed rule, which also mandated a 30-day cooling-off period for issuers.
- A limitation on the ability of anyone other than issuers to use multiple overlapping Rule 10b5-1 plans, which compares favorably to the proposed rule, which included issuers in the scope of this provision.
- New Item 402(x) was adopted as proposed with regard to the narrative disclosure, but with important modifications as respects the tabular disclosure of awards, including the timing of disclosure. Disclosure will be required for awards made in the four business days before the filing of a periodic report or the filing or furnishing of a current report on Form 8-K that discloses material nonpublic information (including earnings information) and ending one business day after a triggering event, rather than within 14 days of the release of material nonpublic information as proposed.
A comparison of the above-referenced high-level Fact Sheet to the similarly high-level Fact Sheet that accompanied the proposed rule reveals few additional substantive changes between the proposed and final rules.
As previously reported, the Society submitted a comment letter on the proposed rule in April 2022.
The rules will become effective 60 days following publication of the release in the Federal Register. Section 16 reporting persons will be required to comply with the amendments to Forms 4 and 5 for beneficial ownership reports filed on or after April 1, 2023. Issuers will be required to comply with the new disclosure requirements in Exchange Act periodic reports on Forms 10-Q, 10-K, and 20-F and in any proxy or information statements in the first filing that covers the first full fiscal period that begins on or after April 1, 2023. Compliance by smaller reporting companies will be deferred by six months.
See these statements from Chair Gary Gensler and Commissioners Caroline Crenshaw, Jaime Lizárraga, Hester Peirce, and Mark Uyeda; Mayer Brown’s post; “SEC Toughens Insider Trading Rules for Execs, Limits Protections” (Bloomberg Law); and additional information & resources on our Insider Trading/Section 16/Rule 10b5-1 page.
This post first appeared in today's weekly Society Alert!