In our Client Alert, we discuss the final rules adopted by the U.S. Securities and Exchange Commission (SEC) on December 14, 2022, which amend Rule 10b5-1 under the Securities Exchange Act of 1934 (Exchange Act) to impose additional conditions to the availability of the affirmative defense under Exchange Act Rule 10b5-1(c)(1). In addition, the final rules require new disclosures by issuers relating to Rule 10b5-1 trading plans, insider trading policies, and the timing of certain option grants to officers, as well as new disclosures by Section 16 reporting persons on Forms 4 and 5, including disclosure of bona fide gifts on Form 4 within two business days.
The final rules are effective 60 days after the date of publication in the Federal Register (likely effective March 2023). Therefore, any Rule 10b5-1 trading plans adopted or amended after the effective date of the final rules should comply with the final rules. However, the SEC grandfathered existing Rule 10b5-1 trading plans, meaning that the final amendments to Rule 10b5-1 will not affect the affirmative defense available with respect to Rule 10b5-1 trading plans that were entered into or modified prior to the effective date of the final rules, unless the plan is modified or changed after the effective date in a manner that would be deemed a termination of the plan under the amended rules. The final rules provide transition periods for the new disclosure and tagging requirements, as discussed in greater detail in our Client Alert.
Additional information can be found in the SEC Fact Sheet.