Tag: Regulation S-K Item 402

SEC proposes new rules on 10b5-1 plans [updated]

[This post revises and updates my earlier post primarily to reflect the contents of the proposing release.]

At an open meeting last week, the SEC voted—unanimously—to propose new rules regarding Rule 10b5-1 plans. (The SEC also voted three to two to propose new rules regarding issuer stock repurchases. The proposing release on stock buybacks will be discussed in a subsequent post.) Concerns about potential abuse of Rule 10b5-1 plans have been percolating for many years, and the proposal to add new conditions to the use of the Rule 10b5-1 affirmative defense and new disclosure requirements for 10b5-1 plans has long been anticipated. After all, these plans were one of the first rulemaking targets that SEC Chair Gary Gensler identified after he was sworn in as Chair: 10b5-1 plans, he said back in June, “have led to real cracks in our insider trading regime” and called for a proposal to “freshen up” these rules. (See this PubCo post and the SideBar below.) And in the related press release, Gensler again highlighted concerns about “gaps in Rule 10b5-1—gaps that today’s proposals would help fill.” What wasn’t anticipated was that the vote to issue the proposal would be unanimous! (Remember, though, even former SEC Chair Jay Clayton had discussed the need for “good corporate hygiene” in connection with Rule 10b5-1 plans. See this PubCo post.) But how likely is it that this newfound spirit of unanimity will carry forward to adoption? Time will tell. But do the statements on the proposal, discussed below, of Commissioners Hester Peirce and Elad Roisman already give us a preview of issues they might raise in possible future dissents on adoption of the rulemaking? There is a 45-day comment period after publication in the Federal Register, a time period that Roisman (perhaps taking a cue from Peirce) found to be of insufficient duration.