SEC Adopts Amendments to Modernize Rule 10b5-1 Insider Trading Plans and Related Disclosures

Key Takeaways

• New conditions to the availability of the affirmative defense under the Rule 10b5-1(c)(1), including a cooling-off period before trading can begin for directors, officers, and other persons (other than issuers)
  
• New certification and disclosure requirements regarding issuers’ insider trading policies and regarding the adoption and termination (including modification) of Rule 10b5-1 and certain other trading arrangements by directors and officers
  
• New disclosure requirements for executive and director compensation regarding certain equity compensation awards made close in time to the issuer’s disclosure of material nonpublic information
  
• Updates to Forms 4 and 5 to require Section 16 insiders to identify transactions made pursuant to a Rule 10b5-1(c)(1) trading arrangement and to disclose all gifts of securities on Form 4

The U.S. Securities and Exchange Commission on December 14, 2022, unanimously adopted amendments to Rule 10b5-1 (the “Final Rules”) under the Securities Exchange Act of 1934 (the “Exchange Act”) and new disclosure requirements related to investor protections against insider trading. The Final Rules differ in certain respects from the rules proposed by the SEC on December 15, 2021, as described in our OnPoint.