May 24, 2024

Adoption or Termination of Rule 10b5-1 Plans: Quarterly Disclosure

This spring, a number of questions have been posted on our “Q&A Forum” related to 10b5-1 plan disclosures. One common question, asked a few different ways, relates to whether public companies must disclose their 10b5-1 trading plans in periodic reports.

The Fifth Circuit has vacated the SEC’s Share Repurchase Disclosure Rule. That rulemaking added a paragraph (d) to Item 408 of Regulation S-K. Was that addition to Item 408 also vacated by the Fifth Circuit?

Do the new SEC rules requiring quarterly disclosure of the adoption or termination of 10b5-1 trading plans by directors or officers extend to the company itself? If so what precisely needs to be disclosed?

Current disclosure requirements are counterintuitive because “new” Item 408(a) of Regulation S-K was part of the SEC’s rulemaking related to insider trading & Rule 10b5-1 reform, while Item 408(d) was part of the SEC’s share repurchase disclosure amendments, which were vacated. This Debevoise memo concisely addresses this question:

Q: Is an issuer required to disclose its 10b5-1 trading plans in periodic reports?

A: No, an issuer is no longer required to comply with proposed Item 408(d) of Regulation S-K regarding disclosure of the adoption or termination of any of the issuer’s trading plans that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) in its periodic reports. However, an issuer is required to continue to disclose the adoption, modification and termination of Rule 10b5-1 and other trading arrangements by directors and officers in its periodic reports under Item 408(a) of Regulation S-K.

As an aside, there’s now a bipartisan push to re-propose the SEC’s stock buyback rule! See this Cooley PubCo blog for more.

Programming Note: Our blogs will be off on Monday for the holiday. We wish each of you an enjoyable Memorial Day weekend. We’ll be back to celebrate “T+1 day” with you on Tuesday!

Meredith Ervine