On August 25, 2023, SEC staff posted five new Compliance and Disclosure Interpretations (“C&DI’s”). three of new C&DIs relating to recent amendments to Rule 10b5-1 f two related to the disclosure of internal trading arrangements.
C&DI 120.29 has clarified that the filing date of Form 10-Q or Form 10-K is not the first day of the Cooling off Period for Rule 10b5-1. Instead, the cooling-off period begins on the next business day following the filing date of Form 10-Q or Form 10-K (with the filing date determined pursuant to Rule 13(a)(2) of Regulation ST). C&DI 120.30 has determined that if a participant relies on Rule 10b5-1 to participate in an issuer’s 401(k) plan, an open market transaction conducted at the direction of the plan administrator, rather than at the direction of the plan participant, to match the participant’s contribution will not be Acts as an overlapping plan for the purposes of Rule 10b5-1 that would disqualify the Participant from relying on Rule 10b5-1. C&DI 120.31 has indicated that the Rule 10b5-1(c) check box in Model 4 for securities transactions made pursuant to a Rule 10b5-1 trading plan does not apply to trading plans that were approved prior to the effective date of the Rule 10b5-1 amendments.
With regard to disclosures about insider trading arrangements, C&DI 133A.01 stated that Section 408(a)(1) of Regulation SK does not require disclosure of termination of a plan that terminates due to termination of the plan or completion in accordance with its terms, without any action by the individual. C&DI 133A.02 determined that the disclosure requirements of Section 408(a) do not apply to any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangements covering securities in which the officer or director has a direct or indirect financial interest that can be reported under Article 16
where The administrator or manager has made a decision to approve or terminate.
The full text of this new C&DI appears below:
a questionUnder Rule 10b5-1(c)(1)(ii)(b)(1), the required cooling-off period for directors and officers subject to reporting under Section 16 of the Exchange Act is the last 90 days after a contract, instruction, plan, or “( t) Two business days after the issuer’s financial results have been disclosed on Form 10-Q or Form 10-K for the completed fiscal quarter in which the plan was approved. Is the filing date the first business day for the purposes of Rule 10b5-1(c)(1)(ii)(b)(i) required for the cooling-off period?
Answer: no. For the purposes of the cooling off period specified in Rule 10b5-1(c)(1)(ii)(b)(i), the date of disclosure of the issuer’s financial results is the date on which the relevant Form 10-Q or Form 10-K was filed, and will be the business day The first is the next business day following the filing date. To determine the relevant form filing date, see Rule 13(a)(2) of Regulation ST. For example, if the relevant form is filed on a Monday, trading under the contract, instruction, or plan may begin on Thursday (assuming there are no overlapping federal holidays). In addition, whether the form is submitted before or after the trade opens on a particular day has no effect on the account. (25 August 2023)
a questionUnder a 401(k) plan, the issuer provides cash to a plan manager who purchases shares on the open market to make matching grants of the issuer’s common stock to plan participants. If a participant relies on Rule 10b5-1 to participate in a 401(k) plan, will an affirmative 10b5-1 defense be available to a participant in a concurrent plan for open market purchases or sales?
Answer: Yes. Although participants choose the contribution amount in their individual 401(k) accounts, the open market transaction is conducted at the direction of the plan administrator, not the direction of the plan participant, to match the participant’s contribution to the employer’s. The stock will not be a nested plan for the purposes of Rule 10b5-1 ( c) (1) (2) (d) that would deny the Plan Participant reliance on Rule 10b5-1 of the Concurrent Open Market Trading Plan. (25 August 2023)
a questionDoes the Rule 10b5-1(c) check box in Form 4 for securities transactions made pursuant to the Rule 10b5-1 trading plan apply to trading plans that were approved prior to the effective date of the Rule 10b5-1 amendments?
Answer: no. The Rule 10b5-1 check box in Form 4 applies to transactions made pursuant to a contract, instruction, or written plan to buy or sell the issuer’s securities that are intended to satisfy the terms of the affirmative defense Amended Rule 10b5-1(c). See Issue #11138-33 (Dec. 14, 2022). (25 August 2023)
a questionUnder Section 408(a)(1) of Regulation SK, does a plan termination disclosure requirement require disclosure of a plan that expires due to expiration or incompleteness (ie, the plan terminates on its terms and without any action by the individual)?
AnswerDisclosure regarding plan termination is not required for a plan that terminates due to expiration or incompleteness. (25 August 2023)
a questionSection 408(a) of Regulation SK requires disclosure of whether “any director or officer (as defined in § 240.16a-1(f) of this chapter)” has approved or terminated a Rule 10b5-1 business arrangement or changed Rule 10b5-1 Trading arrangements during the fiscal quarter. Does this disclosure requirement apply to any business arrangement covering securities in which the manager or officer has a financial interest?
AnswerSection 408(a) applies to any trading arrangement under Rule 10b5-1 or a trading arrangement other than Rule 10b5-1 covering securities in which the administrator or manager has a direct or indirect financial interest that is reported under Section 16 that the administrator or manager has taken decision to approve or terminate. (25 August 2023)
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