New Rule 10b5-1 Questions Abound

The SEC’s December 14, 2022, Final Rule “Insider Trading Arrangements and Related Disclosures” dramatically changed the landscape for using Rule 10b5-1 plans.

One of the major questions the new rule raises is “what is a non-Rule 10b5-1 trading plan?”  Gary Brown, Partner, Nelson Mullins and SEC Institute workshop leader and author, and his colleague Charles Vaughn, Partner, Nelson Mullins, address this question and the issues it raises in their firm’s securities alert titled “To be or not to be a “non-Rule 10b5-1 trading arrangement” – that is the question!”

You can also learn about these required changes in PLI’s related One-Hour Briefings:

SEC Amendments to Rule 10b5-1 and Related Disclosure Requirements  (on-demand)

Rule 10b5-1 Amendments – More Than Meets the Eye – Implementation Conundrums and Disclosure Challenges  (scheduled for March 23, 2023)

As always, your thoughts and comments are welcome!

5 thoughts on “New Rule 10b5-1 Questions Abound

  1. Hey George, related question for you is Form 144 for affiliates (mainly Section 16s). Is a Form 144 only filed when there is a 10b5-1 trading plan? What if a Section 16 has a Sell to Cover transaction as part of an equity plan transaction where some shares are sold solely to cover tax withholdings and/or exercise costs. Would a Form 144 be required for these shares that were sold?

    1. Hi Bill! Great to hear from you. When Form 144 is used by affiliates it is used to allow sales without a registration requirement. That is, insiders can take advantage of an exemption from registration using Rule 144 and Form 144. This does not require a 10b5-1 trading plan. In the circumstance you describe, I think there is a significant legal question. I will ask one of our attorney workshop leaders about this. Hope all is well!

      1. Thanks George…

        Another thing to add is these shares are issued from an equity plan previously registered on a Form S-8. So was just curious if Form 144 still needed to be filed for these types of transactions or if there was some other exemption. Unlike Section 16 Forms 3, 4, 5 I was a bit confused on who actually files Form 144 and if it was just in connection with a 10b5-1 plan. As always appreciate your thoughts on these lovely SEC matters 🙂

        1. HI Again Bill! This is from Gary Brown of Nelson Mullins: A Form 144 (Notice of Proposed sale) is required any time anyone who is an “affiliate” sells stock if the amount of securities to be sold in reliance upon Rule 144 during any period of three months exceeds 5,000 shares or other units or has an aggregate sale price in excess of $50,000. I think if the shares are from and equity plan things are getting pretty specific and best to consult company counsel after that. Make sense?

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