SEC’s Division Of Corporation Finance Issues Five Compliance And Disclosure Interpretations Related To Rule 10b5-1 – Corporate Governance

On August 25, 2023, the SEC’s Division of Corporation
Finance issued five Compliance and Disclosure Interpretations
relating to the new Rule 10b5-1 requirements, summarized below:

Question 120.29: The Rule does not permit
trades to be made under plans adopted by directors and officers
subject to Exchange Act Section 16 reporting until the later of 90
days after the adoption of the 10b5-1 trading plan or “[t]wo
business days following the disclosure of the issuer’s
financial results in a Form 10-Q or Form 10-K for the completed
fiscal quarter in which the plan was adopted …” The staff
interprets the latter requirement to mean that two full business
days must have elapsed following the filing date of the relevant
10-Q or 10-K before trading may occur. A filing made after the
EDGAR filing deadline is not “filed” for this purpose
until the next business day. For example, if the relevant form is
filed on a Monday, trading may commence under the 10b5-1 plan on
Thursday (assuming no intervening Federal holidays). Whether a form
is filed before or after trading opens on a given day has no
bearing on the calculation.

Question 120.30: An arrangement under which a
plan administrator conducts open-market transactions to match
contributions by participants 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 even though the
participant elects how much to contribute to his or her individual
401(k) account.

Question 120.31: 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.

Question 133A.01: Under Item 408(a)(1) of
Regulation S-K, the requirement to disclose plan terminations does
not require disclosure of a plan that ends due to its expiration or
completion in accordance with its terms.

Question 133A.02: Item 408(a) requires
disclosure of a director’s or officer’s decision to adopt
or terminate any Rule 10b5-1 trading arrangement or non-Rule 10b5-1
trading arrangement covering securities in which the officer or
director has a direct or indirect pecuniary interest that is
reportable under Section 16.

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