January 19, 2023

SEC’s Rule 10b5-1 Amendments: Blackout Periods – An Extra Hurdle

As John blogged a few weeks ago, the clock is now running on the SEC’s recent Rule 10b5-1 amendments – and we’ll be covering what you need to do right now in a webcast coming up next Tuesday, January 24th at 2pm ET. To get a jump on thinking about all of that, I’m happy to share this guest blog from Orrick’s JT Ho, Carolyn Frantz, and Bobby Bee:

The adopting release for the SEC’s recent Rule 10b5-1 amendments has now been published in the Federal Register and 10b5-1 plans that are adopted by non-issuers on or after February 27, 2023 must comply with the new rules. While a lot of attention has been paid to the new requirement that, for directors and officers, the first trade under a plan can occur no sooner than 90 days after the plan is entered into, there are other considerations that can significantly impact planning.

First, in some circumstances, the cooling-off period can be longer than 90 days – the rule provides that the first trade under a new plan occur after the later of 90 days or two days after filing the 10-Q or 10-K for the fiscal quarter in which the plan was adopted. In some circumstances, this could significantly lengthen the applicable period before the first trade can occur, particularly for plans entered into near the end of the fiscal year, given the amount of time between the end of the fourth quarter and the filing of the 10-K. In addition, many issuers restrict the adoption, or amendment, of 10b5-1 plans during a blackout period around earnings for a group, which typically includes directors and officers. The combination of the impact of the cooling-off period and the blackout period restrictions, however, limit flexibility for planning initial trades using 10b5-1 plans.

For example, consider a Large Accelerated Filer with a fiscal year end of December 31 and blackout periods starting on the last day of the second month of each fiscal quarter and running through a period two days past the earnings announcement. Directors and officers wishing to enter plans would only have the following options for entering into plans and commencing trades in 2023:

2023 Trading Window Dates Earliest Potential Trade Date
First Window Open: Monday, May 15, 2023 Monday, August 14, 2023 (90 days)
Close: Tuesday, May 30, 2023 Tuesday, August 29, 2023 (90 days)
Second Window Open: Monday, August 14, 2023 Wednesday, November 15, 2023 (93 days)
Close: Wednesday, August 30, 2023 Wednesday, November 29, 2023 (90 days)
Third Window Open: Wednesday, November 15, 2023 Wednesday, March 6, 2024 (112 days)
Close: Wednesday, November 29, 2023 Wednesday, March 6, 2024 (98 days)


The date of first trade could be even later than this, however, if an existing 10b5-1 plan is terminated during a newly adopted 10b5-1 plan cooling-off period – which is possible under the new rule, given that overlapping plans are allowed so long as the time in which trades are being made does not overlap. In such a case, the cooling-off period for the newly adopted 10b5-1 plan would restart at the termination of the prior plan.

It is wise to ensure that your directors and officers understand the impact of these restrictions on their planning, and in particular, understand any trades they want to execute under a new 10b5-1 plan before year end must be planned in the summer.

Liz Dunshee