Change of Plans: Recent SEC Amendments Heighten Conditions to Rule 10b5-1 Plans

by Mikha Romero


On December 14, 2022, the Securities and Exchange Commission (SEC) adopted several amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 (Exchange Act) to increase investor protections against insider trading.[1] The amendments enhance the disclosure requirements for issuers and revise the conditions of the Rule 10b5-1(c)(1) affirmative defense to insider trading liability under §10(b) and Rule 10b-5.[2] The new conditions to the affirmative defense include: (1) cooling-off periods for directors, officers, and persons other than issuers (non-issuers); (2) director and officer representations; (3) restrictions on multiple Rule 10b5-1 plans; (4) limitations to single-trade arrangements; and (5) an expansion of the good faith requirement contained in the former rule.[3] The amendments became effective on February 27, 2023.[4]

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