The SEC released, on May 25, 2023, three new Compliance and Disclosure Interpretations (C&DIs) focused on recent changes to Rule 10b5-1 and reporting of insider trading policies and procedures. The new C&DIs provide as follows:
- New C&DIs 120.26 and 120.27 clarify what many (including us) felt was ambiguous language related to the implementation date of several of the new requirements of Regulation S-K. Per the adopting release, compliance with the new quarterly and annual disclosure requirements (for non-smaller reporting companies (SRCs)) is required “in the first filing that covers the first full fiscal period that begins on or after April 1, 2023.” For SRCs, the compliance date is “the first filing that covers the first full fiscal period that begins on or after Oct. 1, 2023.” Proxy statement disclosure is required after completion of the first full fiscal year beginning on or after April 1, 2023.
Thus, according to the new guidance, the following deadlines apply (in each case assuming a Dec. 31 fiscal year end):
- New C&DI 120.28 addresses the use of overlapping Rule 10b5-1 plans. The recent Rule 10b5-1 amendments generally provide that the affirmative defense is not available if a person has multiple Rule 10b5-1 plans, unless trading pursuant to the later-commencing plan is prohibited until all trades under the earlier-commencing plan are completed. C&DI 120.28 explains that, if the earlier commencing plan is terminated, the prescribed cooling off period for the later-commencing plan will be reset and will begin on the termination date of the earlier-commencing plan. In other words, trades under a later-commencing plan will not be permitted to rely upon the affirmative defense until a new cooling off period has been satisfied, regardless of when the later-commencing plan was originally adopted. However, if the earlier-commencing plan ends by its terms, with no action by the individual, trades may begin under the later-commencing plan as soon as the original cooling off period is satisfied, which could be as soon as the earlier plan ends (depending upon when the later plan was adopted).
