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August 28, 2023

SEC’s Division of Corporation Finance Issues Five Compliance and Disclosure Interpretations Related to Rule 10b5-1


On August 25, 2023, the SEC’s Division of Corporation Finance issued five Compliance and Disclosure Interpretations relating to the new Rule 10b5-1 requirements, summarized below:

Question 120.29: The Rule does not permit trades to be made under plans adopted by directors and officers subject to Exchange Act Section 16 reporting until the later of 90 days after the adoption of the 10b5-1 trading plan or “[t]wo business days following the disclosure of the issuer’s financial results in a Form 10-Q or Form 10-K for the completed fiscal quarter in which the plan was adopted ...” The staff interprets the latter requirement to mean that two full business days must have elapsed following the filing date of the relevant 10-Q or 10-K before trading may occur. A filing made after the EDGAR filing deadline is not “filed” for this purpose until the next business day. For example, if the relevant form is filed on a Monday, trading may commence under the 10b5-1 plan on Thursday (assuming no intervening Federal holidays). Whether a form is filed before or after trading opens on a given day has no bearing on the calculation.

Question 120.30: An arrangement under which a plan administrator conducts open-market transactions to match contributions by participants with employer stock would not be an overlapping plan for purposes of Rule 10b5-1(c)(1)(ii)(D) that would disqualify a plan participant’s reliance on Rule 10b5-1 for a concurrent open market trading plan even though the participant elects how much to contribute to his or her individual 401(k) account.

Question 120.31: The Rule 10b5-1(c) check box on Form 4 for securities transactions made pursuant to a Rule 10b5-1 trading plan does not apply to trading plans that were adopted prior to the effective date of the amendments to Rule 10b5-1.

Question 133A.01: Under Item 408(a)(1) of Regulation S-K, the requirement to disclose plan terminations does not require disclosure of a plan that ends due to its expiration or completion in accordance with its terms.

Question 133A.02: Item 408(a) requires disclosure of a director’s or officer’s decision to adopt or terminate any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement covering securities in which the officer or director has a direct or indirect pecuniary interest that is reportable under Section 16.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.