The SEC has unanimously adopted amendments to Rule 10b5-1, stemming from rules originally proposed in January 2022. The amendments include, among other things, new conditions to the availability of the 10b5-1 affirmative defense, as well as new disclosure requirements related to the adoption and use of 10b5-1 trading plans and equity compensation awards made close in time to a company’s release of material nonpublic information ("MNPI"). The new rules require cooling-off periods prior to trading under a 10b5-1 plan, as follows:

• For officers and directors, either: 

  • 90 days after adoption of a plan; or 

  • Two business days following disclosure of financial results for the period in which the plan was adopted.

• For all other individuals, 30 days after adoption of a plan.

In addition, officers and directors must certify at the time of adoption or modification of a plan that:

• They are not aware of MNPI; and

• The plan is being adopted in good faith and not as a part of a plan or scheme to evade the prohibitions of Rule 10b-5.

The new disclosure requirements include:

• A requirement that Form 4 and Form 5 filers indicate, via a checkbox, that a transaction was intended to meet the requirements to the Rule 10b5-1(c) affirmative defense;

• Quarterly disclosure by issuers regarding the use of 10b5-1 plans by the issuer’s directors and executive officers;

• Disclosures in both a tabular and narrative form regarding options and option-like instruments granted in close proximity to the issuer’s release of MNPI, and policies and procedures related thereto; and

• A requirement to annually disclose whether the issuer has adopted insider trading policies and procedures (including a description of them) and if not, why it has not done so.

The amendments will be effective 60 days after publication in the Federal Register. The Section 16 requirements will apply for Forms 4 and 5 filed after April 1, 2023, and the periodic reporting and proxy requirements will be applicable for the first filing that covers the full fiscal period that begins on or after April 1, 2023 (for most companies, their second quarter Form 10-Q). Smaller reporting companies will have an additional six months to comply.