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In December 2022, the U.S. Securities and Exchange Commission (SEC) adopted final rules relating to insider trading arrangements and related disclosures. Among other things, the final rules require new issuer disclosures relating to Rule 10b5-1 trading plans, insider trading policies and procedures, option grant policies and procedures, and certain option awards made to named executive officers (NEOs) close in time to the release of material nonpublic information (MNPI). For more information on this rulemaking, please see our Client Alert. Compliance with some of the new disclosure requirements is already required. However, importantly, there are new annual disclosure requirements under Items 408(b), 601(b)(19), and 402(x) of Reg. S-K that will first be required in annual reports on Form 10-K and proxy or information statements[1] beginning with companies with March 31, 2024, fiscal year-ends (other than smaller reporting companies for which compliance will first be required for companies with September 30, 2024, fiscal year-ends). These requirements include the following:

  • Insider Trading Policies and Procedures: Items 408(b) and 601(b)(19) of Reg. S-K—Under Item 408(b)(1), companies are required to disclose whether they have adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of their securities by directors, officers and employees, or the company itself, that are reasonably designed to promote compliance with insider trading laws, and applicable listing standards. If not, then the company is required to explain why it has not done so. Conversely, if the company has adopted insider trading policies and procedures, then Items 408(b)(2) and 601(b)(19) require the company to file these policies and procedures as an exhibit to its annual report on Form 10-K. The disclosure required pursuant to Item 408(b)(1) must be provided in Inline XBRL format.
  • Option Grant Policies and Procedures: Item 402(x)(1) of Reg. S-K—Under Item 402(x)(1), companies are required to discuss their policies and practices on the timing of option awards in relation to their disclosure of MNPI, including 1) how the board determines when to grant such awards (for example, whether such awards are granted on a predetermined schedule); 2) whether the board or compensation committee takes MNPI into account when determining the timing and terms of such an award, and, if so, how the board or compensation committee takes MNPI into account when determining the timing and terms of such an award; and 3) whether the company has timed the disclosure of MNPI for the purpose of affecting the value of executive compensation. The disclosure required pursuant to Item 402(x)(1) must be provided in Inline XBRL format.
  • Close in Time Option Awards to NEOs: Item 402(x)(2)—If, during the last completed fiscal year, the company awarded options to one or more NEOs in the period beginning four business days before the filing of a Form 10-Q, Form 10-K, or the filing or furnishing of a Form 8-K that discloses MNPI (other than an Item 5.02(e) Form 8-K that discloses a material new option award grant) and ending one business day after the filing or furnishing of such report, then the company must provide the tabular disclosure required under Item 402(x)(2). The disclosure required pursuant to Item 402(x)(2) must be provided in Inline XBRL format.

Companies (other than smaller reporting companies)[2] with March 31, 2024, or later fiscal year-ends  should review carefully these new disclosure requirements and, where applicable, ensure that they are including these new disclosure requirements in their annual reports and proxy statements.


[1] The information required by Item 408(b) of Reg. S-K is required in Item 10 of Part III of Form 10-K, and Item 7(b) of Schedule 14A. The exhibit required by Item 601(b)(19) is required in Item 15 of Part IV of Form 10-K. The information required by Item 402(x) of Reg. S-K is required in Item 11 of Part III of Form 10-K, and Item 8 of Schedule 14A. Instruction G(3) of Form 10-K provides that the information required by Part III of Form 10-K may be incorporated by reference from the company’s definitive proxy statement which involves the election of directors, if such definitive proxy statement is filed with the SEC no later than 120 days after the end of the fiscal year covered by the Form 10-K.

Foreign private issuers have disclosure requirements similar to Items 408(b) and 601(b)(19), which are included in Item 16J in Form 20-F; however, they do not have disclosure requirements similar to Item 402(x). 

[2] As discussed above, these new annual disclosures will first be required for smaller reporting companies with September 30, 2024 fiscal year-ends. Accordingly, smaller reporting companies with September 30, 2024, or later fiscal year-ends should review carefully these new disclosure requirements and, when and where applicable, ensure that they are including these new disclosure requirements in their annual reports and proxy statements.