SEC Proposes Amendments to Rule 10b5-1 and Enhanced Disclosures Relating to Rule 10b5-1 Trading Plans in Issuer Reports and Certain Section 16 Reporting Forms

December 17, 2021

On December 15, 2021, the SEC proposed amendments to Rule 10b5-1 under the Securities Exchange Act of 1934, relating to insider trading arrangements. The SEC indicated that the proposed amendments aim to address critical gaps in the SEC’s insider trading regime and to help shareholders understand when and how insiders are trading in securities for which they may at times have material nonpublic information.

The proposed amendments to Rule 10b5-1 would update the requirements for the affirmative defense to Rule 10b-5 liability for insider trading, including, among other things, imposing a 120-day cooling-off period for officers and directors before trading could commence under a plan; prohibiting overlapping trading plans (which could be used to selectively cancel individual trades on the basis of material nonpublic information); limiting single-trade plans to one trading plan per twelve-month period; and requiring directors and officers to furnish written certifications that they are not aware of any material nonpublic information about the issuer and that the plan is being adopted in good faith.

The SEC also proposed rules that would require enhanced disclosure regarding Rule 10b5-1 trading arrangements (in quarterly reports and Section 16 filings for insiders), option grant policies and practices (in annual reports), and issuer insider trading policies and procedures (in annual reports).

See the following for further information:

SEC press release https://www.sec.gov/news/press-release/2021-256\

Proposed rule https://www.sec.gov/rules/proposed/2021/33-11013.pdf

Fact sheet https://www.sec.gov/rules/proposed/2021/33-11013-fact-sheet.pdf


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Compliance, Investment Advisers, Investment Companies, Mutual Funds, Regulatory