Recent SEC C&DI updates for 10b5-1 plans

Viewpoints
August 30, 2023
1 minutes

On August 25, 2023, the SEC staff issued some clarifying Compliance and Disclosure Interpretation or “C&DI” updates on 10b5-1 plans and related matters. The guidance from the SEC staff is paraphrased below:

Regulation S-K C&DI updates:

  • Under Item 408(a)(1) of Regulation S-K, disclosure regarding termination of a plan is not required for a plan that ends due to its expiration or completion.  (Question 133A.01)
  • The Item 408(a) of Regulation S-K disclosure requirement applies to any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement covering securities in which an officer or director has a direct or indirect pecuniary interest that is reportable under Section 16 that the officer or director has made the decision to adopt or terminate.  (Question 133A.02)

Exchange Act Rules C&DI updates:

  • Regarding the required cooling-off period specified in Rule 10b5-1(c)(1)(ii)(B)(1), the date of disclosure of the issuer’s financial results is the filing date of the relevant Form 10-Q or 10-K, and the first business day for purpose of waiting the cooling off period would be the next business day that follows the filing date. Whether a form is filed before or after trading opens is irrelevant.  (Question 120.29)
  • Reliance on Rule 10b5-1 for participation in a 401(k) plan is available even when participants elect how much to contribute to their individual 401(k) accounts and there is an open-market transaction conducted at the direction of the plan administrator to match a contribution by the participant with employer stock.  Would not be an overlapping plan for purposes of Rule 10b5-1(c)(1)(ii)(D) that would disqualify a plan participant’s reliance on Rule 10b5-1 for a concurrent open market trading plan.  (Question 120.30)
  • The Rule 10b5-1(c) check box on Form 4 for securities transactions made pursuant to a Rule 10b5-1 trading plan does not apply to trading plans that were adopted prior to the effective date of the amendments to Rule 10b5-1.  Instead, it applies only to transactions that are made pursuant to a contract, instruction, or written plan intended to satisfy the affirmative defense conditions of amended Rule 10b5-1(c).  (Question 120.31) 

For the complete SEC Compliance and Disclosure Interpretation, please click here.