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I shared a few trends last month about newly filed insider trading policies. This Gibson Dunn blog adds observations from the 49 S&P 500 companies that were required to comply with the new “Exhibit 19” requirement as of June 30th (remember that for calendar-year companies, the new exhibit is first required with the Form 10-K to be filed in spring 2025). Here are 12 key takeaways:

1. Who’s Subject to the Policy: In addition to covering all company directors & personnel, and their family members, 82% expressly state that they apply to legal entities whose transactions are controlled or influenced by company personnel.

2. Gifts: 61% prohibit gifts when an insider as MNPI and/or apply the blackout & pre-clearance restrictions to gifts, and 8% restrict gifts only if the donor has reason to believe the donee will sell while the donor has MNPI. Of the policies that do not apply gift restrictions to all employees, a majority restrict gifts only for certain covered persons that are subject to additional restrictions, such as blackout periods and/or pre-clearance procedures.

3. Options: 69% exempt exercises of options when there is no associated sale on the market; however, exercises of options where there is a sale of some or a portion of shares delivered upon exercise (e.g., cashless broker exercise) are typically treated like any other sale.

4. Other Equity Awards: 59% exempt vesting and settlement of equity awards, such as RSUs and restricted stock, and 51% of the policies specifically provide that withholding of shares for tax purposes (i.e., net share settlement) is exempt.

5. Shadow Trading: 82% prohibit trading in the securities of another company when the person is aware of MNPI about such company that was learned in the course of or as a result of the covered person’s employment or relationship with the company. The remainder of the policies apply the prohibition more broadly to trading in the securities of another company while aware of MNPI about that company, without specifically addressing how the information was learned.

6. Who’s Subject to Blackouts/Windows: 88% subject directors, executive officers and a designated subset of employees to regular quarterly blackout periods, with a few policies applying two different blackout periods to different groups of employees.

7. Blackout Dates: The start date of the quarterly blackout periods ranges from quarter end to four weeks or more prior to quarter end. Under almost half of the policies (45%), the quarterly blackout periods start approximately two weeks prior to quarter end, 14% start the blackout periods three to four weeks prior to quarter end, and 18% start four weeks or more prior to quarter end. A significant majority of the policies (76%) end the quarterly blackout periods one to two full trading days after the release of earnings, with more policies ending after one trading day (51%) than two trading days (24%).

8. Pre-Clearance: For 65% of the policies, the preclearance persons are a subset of the persons subject to blackout periods, while for a minority of the policies (29%), they are the same as the persons subject to the blackout periods.

9. Other Prohibited/Discouraged Transactions: All of the policies prohibit or otherwise restrict certain types of transactions regardless of whether they involve actual insider trading. The most common prohibitions addressed: hedging transactions (96%);[8] speculative transactions (96%); pledging securities as collateral for a loan (90%); and trading on margin or holding securities in margin accounts (82%). A significant majority of the policies do not specifically address standing or limit orders or short-term trading, but of the ones that do, a significant majority take the approach of discouraging such transactions rather than strictly prohibiting them. Even where standing or limit orders are not strictly prohibited, some policies require that such orders be cancelled if the person becomes aware of MNPI (or prior to the start of a blackout period, if applicable).

10. Rule 10b5-1 Plans: All of the policies address the availability of Rule 10b5-1 plans. 71% describe the specified conditions under the SEC rules for a plan to qualify as a Rule 10b5-1 plan, although some do so in a more streamlined manner than others. Of these policies, a majority include Rule 10b5-1 plan requirements within the body of the policy, a minority do so in an appendix and one company filed the plan guidelines as a separate exhibit. 29% do not describe the specified conditions under Rule 10b5-1, but provide a general statement regarding the affirmative defense and refer covered persons to the officer administering the policy.

11. Company Transactions: Item 408(b) of Regulation S-K requires a public company to disclose whether it has adopted insider trading policies and procedures governing transactions in company securities by the company itself, and, if so, to file the policies and procedures, or if not, to explain why. Of the 23 S&P 500 companies subject to Item 408(b) that filed a Form 10-K and proxy statement prior to June 30, 2024, 78% did not address insider trading policies or procedures governing companies’ transactions in their own securities. Of the ones that did, most included a brief sentence or two about the company’s policy of complying with applicable laws in trading in its own securities. Only one company in our surveyed group filed a company repurchase policy as a separate exhibit.

12. Exhibit Filing: 88% of the companies filed only a single insider trading policy and no other related policies or documents (even where they referenced other related policies in their insider trading policy).

The blog notes that it’s still appropriate for specific provisions to vary from company to company. But when it comes to key policy terms that your insiders might ask about, it helps to understand “what’s market.” Make sure to check out our “Insider Trading” Practice Area for additional practical guidance.

This topic is also on the agenda at our “2024 Proxy Disclosure & Executive Compensation Conferences” – which are less than a month away! We’ll be sharing reminders for your next Form 10-K as well as practice pointers & trends. If you can’t make it to the Conferences in person, we also offer a virtual option. Register today by visiting our online store or by calling us at 800-737-1271.

– Liz Dunshee