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SEC proposes new Rule 10b5-1 rule

On December 15, the SEC proposed amendments to enhance insider trading disclosure requirements and investor protections against insider trading. The proposal focuses on transparency related to executive trading arrangements under Rule 10b5-1 of the Securities Exchange Act and increased disclosures of a registrant’s policies and procedures related to insider trading. The proposed changes amend the affirmative defense to insider trading for parties that frequently have access to material nonpublic information provided under Rule 10b5-1(c) and include: imposing a cooling off period of 120 days for directors and officers and 30 days for issuers after either adopting or modifying a 10b5-1 plan; requiring certifications by directors and officers that they are not aware of any material nonpublic information and are adopting the plan in good faith as of the date they enter into a new or modified 10b5-1 plan; and prohibiting overlapping trading plans and limiting single-trade plans to one trading plan per 12-month period.

The proposal would also require enhanced disclosures related to a registrant’s insider trading policies and procedures as well as any option awards granted to directors and officers within 14 days of a significant filing.

The proposal is subject to a 45-day comment period once the proposing release is published in the Federal Register.

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