As a trusted provider of employee share plan services in Asia, Computershare updates our clients on regulatory changes to assist with meeting compliance requirements.

The SEC adopted amendments to Rule 10b5-1 (under the Securities Exchange Act of 1934) and new disclosure requirements to enhance investor protections against insider trading late last year.

Issuers will be required to comply with new disclosure requirements in Exchange Act periodic reports on Forms 10-Q, 10-K and 20-F and in any proxy or information statements in the first filing that covers the first full fiscal period that begins on or after 1 April 2023.

We have incorporated the new rule of 10b5-1 plans into our current procedures to address the new requirements.

The key amendments to the rule update the conditions that must be met for the 10b5-1 affirmative defence. Specifically, regarding cooling-off periods for persons other than issuers.

  • A minimum “cooling-off period” will be required, between the date a Rule 10b5-1 trading plan is adopted or modified and when trading under the plan commences.
  • Directors and officers must now include representations in their plans to certify that, at the time of plan 10b5-1 adoption or modification, (1) they are not aware of any material non-public information about the issuer or its related securities; and (2) they are adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5.
  • The use of multiple overlapping trading plans is restricted in the new amendments, and limit reliance on the affirmative defence for a single-trade plan to one in any 12-month period (for all persons other than issuers).
  • More comprehensive disclosures are required regarding:
    • Issuers’ policies and procedures related to insider trading, including more frequent disclosure on the use of Rule 10b5-1 plans and other trading arrangements by directors and officers.
    • Issuers’ policies and practices regarding disclosure of certain options grants close in time to the release of material non-public information. This is a more tabular and narrative disclosure requirement requiring issuers to discuss decisions related to the timing of awards, consideration of non-public information (if at all) and whether such disclosures are timed to affect the value of awards.

For a complete overview of the amendments, visit the SEC website here.