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Section 16—Rule 10b5-1 Disclosure Changes for SEC Filers

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The U.S. Securities and Exchange Commission’s recent updates to insider trading rules aim to further level the playing field between investors and company insiders who have more information than they do. But the changes also include a few new dates and details SEC filers should know.

Timing of Rule 10b5-1 disclosure changes

The updates to Rule 10b5-1 of the Securities Exchange Act of 1934 affect all Section 16 reporting persons. This regulation significantly changes the timing and filing method for the reporting of bona fide gifts of securities as well as a new “affirmative defense conditions of Rule 10b5-1(c)” reporting requirement on Forms 4, 4/A, 5, and 5/A, beginning April 1, 2023, (no joke).

Here are important dates within the rule, which you can read in the Federal Register:

  • February 27, 2023: With the rule taking effect, bona fide securities gifts must now be reported on Form 4 and within two business days. (Reporting these gifts on Form 5, 45 days after year end, is no longer permitted.)

  • March 20, 2023: The release of EDGAR 23.1 will add a 10b5-1 affirmative defense checkbox to Forms 4, 4/A, 5, and 5/A. This technical change to the Ownership XML file format is a breaking change: A document created using an earlier version of the Ownership XML format will not be accepted by EDGAR. All filing agents will need to implement this change, even though the reporting person may, but is not required to, report the affirmative defense until filings submitted on April 3, 2023 (the first business day following the regulatory implementation date)

  • April 1, 2023: Reporting persons are required to comply with the Rule 10b5-1(c) affirmative defense conditions

Next steps

  • Ensure that all reporting of bona fide gifts of securities from here on out is performed on Form 4 within two business days of the event

  • Verify that your SEC reporting software vendor will be EDGAR 23.1 compliant on March 20, 2023 (Workiva SEC solution users, you are set!)

  • Prepare your organization to comply with the Rule 10b5-1(c)(1) affirmative defense to insider trading liability rules, including cooling-off periods, reporting requirements, and other conditions, effective April 1, 2023

Find more information from the SEC

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