As we enter financial reporting periods beginning on or after April 1, 2023, here is a hopefully helpful reminder to include the new Rule 10b5-1 plan disclosures in your next quarterly report. As a reminder, the SEC’s December 2022 Final Rule implementing changes to how individuals use 10b5-1 plans, also requires new disclosures about:
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- Officer and director plans, and
- Company insider trading policies.
The rule became effective on February 27, 2023.
The new officer and director plan disclosures are required quarterly in both the 10-Q and 10-K. The mechanics of this process is that S-K Item 408(a) disclosure requirements have been added to the Form 10-K Instructions in Item 9B and the Form 10-Q Instructions in Part II – Item 5. These disclosures include details of adoption, modification and termination and material terms (other than pricing) of both 10b5-1 plans and “non 10b5-1 trading arrangements.” You can find all the details in S-K Item 408.
For non-Smaller Reporting Companies, the new officer and director plan disclosures are required for fiscal periods, including quarters, that begin on or after April 1, 2023. The transition date for Smaller Reporting Companies is periods that begin on or after October 1, 2023 .
These disclosures must be tagged with iXBRL.
The new annual requirements include disclosure of insider trading policies and procedures and disclosures surrounding option awards made to executives where the timing of the award is close in time to the release of material non-public information.
The timing for the new annual disclosures is a bit uncertain. The Final Rule states that non-Smaller Reporting Companies:
“…will be required to comply with the new disclosure and tagging requirements in Exchange Act periodic reports on Forms 10-Q, 10-K and 20-F and in any proxy or information statements that are required to include the Item 408, Item 402(x), and/or Item 16J disclosures in the first filing that covers the first full fiscal period that begins on or after April 1, 2023.”
While this is clear for quarterly fiscal periods, it could be read to mean that the annual disclosures would not be required for years that end on December 31, 2023, but rather the year after that. If this was indeed the intent of the rule, that will hopefully be clarified at some point by the staff.
As always, your thoughts and comments are welcome!