May 25, 2021

Rule 10b5-1: Changes Could be on the Horizon

Back in February, three Democratic US Senators wrote to then Acting SEC Chair Allison Herren Lee urging the SEC to reexamine its policies on Rule 10b5-1 plans – Liz blogged about it at the time.  Since then, Commissioner Lee responded to the Senators with a letter saying that she instructed the staff to review Rule 10b5-1 and develop recommendations for possible changes. This excerpt from Commissioner Lee’s letter touches on aspects of the Rule for which Commissioner Lee requested review:

The Commission adopted Rule 10b5-1 in August 2000 and has not substantively revisited it since then. In the intervening years, market developments and other circumstances have revealed aspects of the rule that may need to be reconsidered, including whether better disclosures about these plans are warranted. Your letter identifies a number of approaches, such as cooling off periods, that may enhance the rule’s effectiveness. With respect to disclosure, there are no specific requirements related to information about 10b5-1 plans and, while some public companies do disclose the details of transactions made pursuant to their 10b5-1 plans, many do not. Similarly, while some insiders indicate on their beneficial ownership reporting forms when transactions are conducted pursuant to 10b5-1 plans, many do not.

As part of this review, the staff will consider the points you raise with respect to public disclosure of 10b5-1 plans, cooling off periods and short-swing profits.

In their February letter, the US Senators requested feedback about the number of enforcement actions the SEC had taken with regarding to 10b5-1 plans in the last five years.  They also requested information about actions the SEC takes to ensure 10b5-1 plans are compliant with SEC rules.  Commissioner Lee’s letter outlines, and includes a brief summary of, the Enforcement actions brought over the last five years that include mention of Rule 10b5-1 plans and says the Enforcement Division will continue to evaluate, as appropriate, Rule 10b5-1 plans during its investigations into potential Enforcement actions.

Reforms to Rule 10b5-1 could be on the horizon.  Commissioner Caroline Crenshaw reportedly views a “cooling-off” period as a solution.  And, as part of his confirmation process, SEC Chair Gary Gensler’s response to questions indicate he would consider modernizing Rule 10b5-1.

To help stay on top of the latest developments, mark your calendars for July 20th and tune in to our webcast “Insider Trading Policies & Rule 10b5-1 Plans”– to hear our own Dave Lynn of Morrison & Foerster, Meredith Cross of WilmerHale, Alan Dye of Hogan Lovells and Section and Haima Marlier of Morrison & Foerster discuss the new enforcement environment, Rule 10b5-1 plan considerations for share buybacks, intersection of insider trading policies and Rule 10b5-1 plans, blackout period trends and more!

Executive Order: Climate Disclosures Get a Push From the Top

Here’s something my colleague Lawrence blogged last week on (also see this Cooley blog):

Late Thursday afternoon, President Biden issued an Executive Order on Climate-Related Financial Risk, which has been rumored to be coming for a couple months. It establishes the Administration’s policy to:

– Advance consistent, clear, intelligible, comparable, and accurate disclosure of climate-related financial risk … including both physical and transition risks;

– Act to mitigate that risk and its drivers, while accounting for and addressing disparate impacts on disadvantaged communities and communities of color … and spurring the creation of well-paying jobs; and

– Achieve the target of a net-zero emissions economy by no later than 2050.

Major highlights of the EO include:

  • Developing a formal comprehensive, Government-wide strategy regarding the measurement, assessment, mitigation, and disclosure of climate-related financial risk to Federal Government programs, assets, and liabilities – in order to increase the long-term stability of Federal operations;


  • Requiring The Secretary of the Treasury to assess, in a detailed and comprehensive manner, the climate-related financial risk, including both physical and transition risks, to the financial stability of the Federal Government and the stability of the U.S. financial system. The report issued by Treasury is to include a discussion of:
      • the necessity of any actions to enhance climate-related disclosures by regulated entities to mitigate climate-related financial risk to the financial system or assets – and a recommended implementation plan for taking those actions, and
      • any current approaches to incorporating the consideration of climate-related financial risk into Financial Stability Oversight Council (FSOC) members’ respective regulatory and supervisory activities and any impediments they faced in adopting those approaches.


  • Treasury is also required to direct the Federal Insurance Office to assess climate-related issues or gaps in the supervision and regulation of insurers.
      • The Secretary of Labor must consider publishing, by September 2021, for notice and comment, a proposed rule to suspend, revise, or rescind the prior administration’s rules that would limit ERISA plans’ ability to consider ESG factors in investment & voting decisions (85 Fed. Reg. 72846 and 85 Fed. Reg. 81658) – this type of action would go further than the DOL’s previously-announced non-enforcement policy for these rules and is intended to bolster the resilience of 401(k) and pension investments.


    • OMB and the Director of the National Economic Council, in consultation with the Secretary of the Treasury, are directed to develop options to enhance accounting standards for Federal financial reporting where appropriate and should identify any opportunities to further encourage market adoption of such standards.


  • The Federal Acquisition Regulatory Council is to consider amending the Federal Acquisition Regulation (FAR) to:
    • require major Federal suppliers to publicly disclose greenhouse gas emissions and climate-related financial risk and to set science-based reduction targets; and
    • ensure that major Federal agency procurements minimize the risk of climate change, including requiring the social cost of greenhouse gas emissions to be considered in procurement decisions and, where appropriate and feasible, give preference to bids and proposals from suppliers with a lower social cost of greenhouse gas emissions.

The official fact sheet was also made available.

2020 Hotline & Incident Reporting: Overall Report Volume Declined Although Not Uniformly

Navex Global recently released its “2021 Incident Management Benchmark Report.” The report provides data collected from over 3000 organizations that received 10 or more hotline or other incident reports in 2020.  The report’s executive summary notes that findings can only be understood within the context of Covid-19 so key measures are reviewed on a month-to-month basis. Here are a few highlights:

Overall incident report volumes decreased although not across the board. For the first time in the history of our annual benchmark the median number of reports declined, dropping to 1.3 reports per 100 employees. A month-to-month analysis reveals the extent to which this decline was driven by COVID-related events. After an initial reporting increase in March (when state of emergency and stay-at-home orders were first declared), reporting levels quickly plummeted by over 30%, reaching record lows in May. To date, report volumes have yet to return to their pre-COVID levels. While the report volume median decreased, the overall range actually increased, reflecting greater volatility and variation within the customer base. Thus, it is inaccurate to state that all, or even most, firms had a uniform experience.

Among other things, the report also found online reporting continues to accelerate while telephonic reporting has declined, anonymous reporting continued on a slow downward trajectory, and the gap between incident occurrence and reporting increased, especially in accounting, auditing and financial reporting where it increased from 16 days to 36 days.

Programming Note: Pausing Blog Emails

Our blog email notifications are paused while we migrate to a new delivery platform. We expect to resume as soon as possible with some improvements we hope you all enjoy. In the meantime, you can continue to find our latest blogs on this page and on social media. Thank you for your patience!

– Lynn Jokela