TheCorporateCounsel.net

Earlier this week, I shared sample disclosures that could be used as a starting point for the new Item 408(a) info that will be required in the next Form 10-Q for most companies. Several interpretive questions are coming up as companies begin to apply this rule to their real-world circumstances. Here are a few common scenarios that our members have asked about on our Q&A Forum (#s 11,370, 11,514, and 11,715):

1. Would an ESPP would be considered a non-rule 10b5-1 trading arrangement that triggers disclosure under the new line item?

2. Would natural expiration of a 10b5-1 plan during the most recent quarter constitute a “termination” of a plan or arrangement that requires disclosure?

3. During the most recent quarter, an executive officer retired and subsequently adopted a Rule 10b5-1 trading plan. Does the disclosure apply only to plans adopted or terminated at a time when an individual was a current executive or director?

For each of these items, my educated guess – with significant assists from John and K&L Gates’ Ali Nardali – is that the SEC did not intend for the rule to pick these up (unless, as John noted in his response to #3, the facts and circumstances suggest that the timing of the plan’s adoption was intended to evade the disclosure obligation that would otherwise arise). However, the Staff hasn’t publicly weighed in. I am keeping my fingers crossed for “Christmas in July” – CDIs!

– Liz Dunshee