Chair Gensler warned us back on June 7, 2021 regarding his concerns with insider use of Rule 10b5-1 trading plans: “In my view, these plans have led to real cracks in our insider trading regime.” Responding to his request, on September 9, 2021, the Commission’s Investor Advisory Committee made recommendations for Rule 10b5-1 reform, particularly regarding waiting periods, mandatory disclosure, and limits on cancellation and number of plans. The subcommittee’s draft recommendation outlines three sets of recommended actions.

First, the subcommittee recommended restricting Rule 10b5-1's "affirmative defense" protection, including:

• Require a "cooling off" period of at least four months between the adoption or modification of a Rule 10b5-1 plan and the execution of the first trade under the newly adopted or newly modified plan;
• Prohibit overlapping plans (i.e., a single person or entity may not have more than one Rule 10b5-1 plan at a time).

Second, the subcommittee recommended enhancing disclosure requirements, including:

• Require electronic submission of Form 144;
• Require enhanced public disclosure of Rule 10b5-1 plans, including in proxy statements and Form 8-K;
• Enhance disclosure of 10b5-1 trades on Form 4;
• Ensure all companies with any securities listed on U.S. exchanges (including ADRs and ADSs filing Form 20-Fs) are subject to Form 4 reporting requirements.

Finally, the subcommittee encouraged the Commission to evaluate its access to information necessary to effectively monitor trading plans established under Rule 10b5-1, and to pursue regulatory action to obtain that information if not unduly burdensome to issuers and insiders.

The subcommittee’s recommendations do not apply to company repurchase plans. We could see a rulemaking proposal before the end of the calendar year.