On August 25, 2023, the SEC published five new Compliance and Disclosure Interpretations (C&DI) on the recently effective Rule 10b5-1 amendments. The new rules were adopted on December 14, 2022 (see HERE) to enhance disclosure requirements and investor protections against insider trading. The amendments include updates to Rule 10b5-1(c)(1), which provides an affirmative defense to insider trading liability under Section 10(b) and Rule 10b-5. This is the second time the SEC has published guidance on the rules having issued three C&DI in May – see HERE.
The rule amendments updated the conditions to satisfy the 10b5-1 affirmative defense, including adding cooling-off periods before trading can commence under a Rule 10b5-1 plan and a condition that all persons entering into a Rule 10b5-1 plan must act in good faith with respect to the plan. The amendments also require directors and officers to include representations in their plans certifying at the time of the adoption of
On December 14, 2022, the SEC adopted amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 (“Exchange Act”) to enhance disclosure requirements and investor protections against insider trading. The amendments include updates to Rule 10b5-1(c)(1), which provides an affirmative defense to insider trading liability under Section 10(b) and Rule 10b-5. The proposed rules were published in HERE. Although there is a statutory framework, the laws surrounding insider trading are largely based on judicial precedence and are difficult to navigate. The rule amendments are intended to provide clarity to the marketplace.
Since the adoption of Rule 10b5-1, courts, commentators, and members of Congress have expressed concern that the affirmative defense under Rule 10b5-1(c)(1)(i) has allowed traders to take advantage of the liability protections provided by the rule to opportunistically trade securities on the basis of material nonpublic information. Furthermore, some academic studies of Rule 10b5-1 trading arrangements have shown that corporate insiders trading pursuant to