February 21, 2023
Don’t Forget the Gifts!
It is important to keep in mind that amended Rule 16a-3, requiring that dispositions by gift be reported on Form 4, will become effective for gifts made on or after next Monday, February 27, 2023. Gifts made before February 27, 2023 will remain reportable on Form 5 within 45 days after the end of the fiscal year in which the gift is made, not within two business days after February 27, 2023. Note that amended Forms 4 and 5 and the amended instructions to both forms, relating to the 10b5-1 checkbox and disclosure of the date of adoption of the 10b5-1 plan, will apply to all reports filed on or after April 1, 2023, so you still have some time to get ready for those new requirements.
Now is a good time to get the word out to insiders that the two business day filing requirement for gifts is fast approaching, so they will need to let their Section 16 compliance contact person know about any gifts of company securities, preferably before they happen, particularly if your insider trading policy has not been updated yet to require pre-clearance of gifts.
Perhaps most importantly, the SEC’s interpretive guidance on gifts has been out there since the SEC proposed the Rule 10b5-1 amendments. As we noted in the January-February 2022 issue of The Corporate Counsel and the January-February 2023 issue of The Corporate Counsel, the SEC stated in both the proposing and adopting releases that “a donor of securities violates Exchange Act Section 10(b) if the donor gifts a security of an issuer in fraudulent breach of a duty of trust and confidence when the donor was aware of material nonpublic information about the security or issuer, and knew or was reckless in not knowing that the donee would sell the securities prior to the disclosure of such information.” As we discussed in the January-February 2023 issue of The Corporate Counsel, companies should consider revising their insider trading policies now to address the SEC’s new guidance. To see how we changed our Model Insider Trading Policy in light of this new interpretive guidance, check out the Special Supplement to the January-February 2023 issue of The Corporate Counsel. Email sales@ccrcorp.com to subscribe today.
– Dave Lynn