(l-r) Mehrnaz Jalali, Paul D. Hallgren, and Kevin Roggow of Cozen O'Conno. Courtesy photos SEC Adopts New Approach to Rule 10b5-1's Affirmative Defense to Insider Trading and Related Matters
The amendments include mandatory cooling-off periods, director and officer certifications, restrictions on multiple overlapping 10b5-1 plans and single-transaction plans and an expanded good faith requirement.
January 24, 2023 at 11:13 AM
10 minute read
Securities Litigation
On Dec. 14, 2022, the Securities and Exchange Commission (SEC) adopted amendments to Rule 10b5-1 (Rule 10b5-1) under the Securities Exchange Act of 1934, as amended (Exchange Act), which provides an affirmative defense to "insider trading," or trading on the basis of material nonpublic information (MNPI), pursuant to plans intended to meet the conditions of Rule 10b5-1 (10b5-1 plans). The amendments include mandatory cooling-off periods, director and officer certifications, restrictions on multiple overlapping 10b5-1 plans and single-transaction plans and an expanded good faith requirement. At the same time, the SEC also adopted new disclosure requirements regarding insider trading policies, the adoption and termination of 10b5-1 plans, and option (or option-like) awards made close in time to a reporting company's (referred to in this article as "registrants" or "issuers") release of MNPI. Finally, Section 16 of the Exchange Act was also amended to require reporting persons (Section 16 reporting persons) to identify transactions effected under a 10b5-1 plan on Forms 4 and 5 and to require disclosure of bona fide gifts of equity securities on Form 4.
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