At today’s open meeting, the Securities and Exchange Commission voted to approve amendments to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The SEC had proposed extensive amendments in January 2022, which were the subject of significant comment from market participants. The final amendments take into account some of the commenters’ concerns—in particular by eliminating the proposed issuer cooling off period and related issuer limitations. That said, the amendments remain prescriptive.

The amendments, among other things, require:

  • A longer cooling off period for directors and officers and a shorter cooling off period for other persons before trading under a plan can commence;
  • A condition for directors and officers to include a representation that they are not in possession of material nonpublic information about the issuer or its securities, and that they are adopting the plan in good faith and not as part of a plan or scheme to evade the rule’s prohibitions;
  • A limitation on persons other than the issuer to use multiple overlapping plans;
  • A limitation on persons other than issuers to rely on the affirmative defense for a single trade plan to one such plan within any consecutive 12-month period; and
  • A good-faith condition.

The final rule also mandates new disclosure requirements, including quarterly disclosures by issuers.  

A detailed client alert will follow, as well as details regarding a webcast. 

The final rules will become effective 60 days following publication of the adopting release in the Federal Register. Section 16 reporting compliance will be applicable for beneficial ownership reports filed on or after April 1, 2023, and issuer periodic reports filed for the first full fiscal period beginning on or after April 1, 2023 will be required to include the additional disclosure. Accommodations will be made for smaller reporting companies.

See the fact sheet. Final rule: 33-11138.pdf (