Insider Trading Arrangements Quarterly Disclosure and Tagging Requirements - Are you Ready?
The SEC adopted amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 with the Final Rule issued in December 2022 for Insider Trading Arrangements and Related Disclosures.
Issuers will be required to comply with the 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 April 1, 2023. The final amendments defer by six months the date of compliance to October 1, 2023 for Smaller Reporting Companies (SRC)s.
iXBRL Tagging Requirements for companies other than SRCs:
- Quarterly Disclosures (Starting with first full quarter that begins on or after April 1, 2023 which includes Form 10-K if the first full fiscal quarter is the issuer’s fourth fiscal quarter)
408(a) Disclosure by registrants regarding the adoption and termination (including modification) of Rule 10b5-1 plans and non-Rule 10b5-1 trading arrangements by registrant’s directors and officers and a description of the material terms of such plans (other than pricing terms).
- Annual Disclosures (Starting with first full fiscal year that begins on or after April 1, 2023)
408(b) Disclosure by registrants whether an issuer has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of the issuer’s securities by directors, officers and employees, or the issuer itself, or if the issuer has not adopted such policies and procedures, an explanation why not.
402(x) Disclosures include:
- Narrative disclosure of an issuer’s policies and practices on the timing of awards of options in relation to the disclosure of material nonpublic information by the issuer
- Tabular disclosure regarding any awards of options granted to a named executive officer within a period starting four business days before and ending one business day after the filing of the issuer’s Form 10-Q or Form 10-K, or the filing or furnishing of a current report on Form 8-K that discloses material nonpublic information
For US GAAP filers, we are highly recommending the migration to US GAAP 2023 for quarterly filings (beginning with Q2 2023) in order to be able to comply with Insider Trading Arrangements and Related Disclosure requirements that will require the use of the 2023 Executive Compensation Disclosure (ECD) taxonomy. The 2023 ECD taxonomy will only be compatible with taxonomies of the same version year per the SEC. The 2023 ECD taxonomy was released in June and will not require a separate migration as the updates were merged within the 2023 US-GAAP Taxonomy. Please see the 2023 ECD taxonomy announcement for key features of the new combination taxonomies.
The SEC has provided the following Fact Sheet, Taxonomy Guide and Small Entity Compliance Guide:
- Fact Sheet - Insider Trading Disclosures
- Executive Compensation Disclosure (ECD) Taxonomy Guide
- Insider Trading Arrangements and Related Disclosures - Small Entity Compliance Guide
Workiva recently received clarification from the SEC that non-Smaller Reporting Company filers are expected to apply the following four boolean elements even if no activity related adoptions or terminations of trading arrangements is disclosed. We are recommending tagging these elements with a "False" value when you have no adoptions or terminations included in your Insider Trading Arrangement disclosure for your quarterly filings.
Rule 10b5-1 Arrangement Adopted [Flag]
Non-Rule 10b5-1 Arrangement Adopted [Flag]
Rule 10b5-1 Arrangement Terminated [Flag]
Non-Rule 10b5-1 Arrangement Terminated [Flag]
We are here to help
Should you choose to purchase a service to perform the migration to the current taxonomy, you may do so by submitting a request through our iXBRL Taxonomy Migration page or you may reach out to your Account Rep, CSM or PSM.
Additional Workiva Resources:
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Hi Community, has anyone seen any kind of examples for how the new disclosures should look? I've mocked up disclosures for my company, but I'm dying to have something to compare them to!
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Assuming you're referring to the 10-Q and not form 4s, yes. I have reviewed a number of filers who have started to disclose under Item 5. Here are links to their filings on the SEC's website:
Gladstone Capital Corp - https://www.sec.gov/ix?doc=/Archives/edgar/data/1143513/000114351323000006/glad-20230331.htm#ia07e38a30a25483a8004f9ae1d2013a3_115
Land's End - https://www.sec.gov/ix?doc=/Archives/edgar/data/799288/000095017023025716/le-20230428.htm#item_5_other_information
State Street Corp - https://www.sec.gov/ix?doc=/Archives/edgar/data/93751/000009375123000554/stt-20230331.htm#i0a83d64383914fcb93177492e3b27c1c_358
Texas Pacific Land - https://www.sec.gov/ix?doc=/Archives/edgar/data/0001811074/000181107423000025/tpl-20230331.htm#idf295c1cf12f48e7a3e9f2d9875540be_190
I am interested in the XBRL component since we typically don't tag anything in item 5. Has anyone thought through that yet?
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Thanks, Jake! I must have been searching on the wrong thing.
I'm actually tagging my mock-up right now which is part of what prompted me to ask my question. The new ECD taxonomy makes tagging super easy. You have to be migrated to the 2023 taxonomy. If you are (or once you do), the ECD will already be enabled. I migrated to the 2023 taxonomy for Q1, so today, when I turned on XBRL, the ECD was just there; I didn't have to do anything. I made sure that the Item 5 section was not marked "Disable XBRL for this section" in the Section Properties panel. Then, I just started adding facts and dragging the tags over from the ECD "Static" tab. There are only so many tags to choose from, so it sort of helps you craft your disclosure.
My question was prompted by the "Trading Arrangement Duration" tag and the lack of "Effective Date" and "End Date" tags. Since 10b5-1 compliant trading arrangements must include a cooling off period, it seemed to make sense that the SEC would want to see evidence of that. Just showing the adoption date and the duration (say, 6 months) doesn't really give a lot of detail.
My next questions are: (1) if I decide to add extended tags for "Effective Date" and "End Date," do I need to create a new section in the Editable XBRL outline to hold them? (2) The "Flag" tags...they're boolean, so does that mean checkboxes like on the cover or will "yes" or "no" work?
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Hi Jennifer - thanks for the insight on the ECD taxonomy. I was unsure how to access for item 5 tagging purposes. I agree that the SEC would want to see evidence of the required cooling off period. Will have to dig into that a bit more. I am looking forward to the answers to your 2 questions at the end.
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If our Company didn't have any 10b5-1 plans in effect or any trades tied to such plans for Q2, would we need to update to the new taxonomy for Q2? Seems as though you only need the new taxonomy if you had plans or trades to disclose.
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What if you did not have any plans or trades, does anyone know if that statement needs to be somehow tagged as well?
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Vida,
Looks like yesterday we have several companies that tagged false for any plans adopted or terminated.
American Airlines: pg 88
https://www.sec.gov/ix?doc=/Archives/edgar/data/6201/000000620123000070/aal-20230630.htm#i6a9e67e2d4ef46158531493eb669e8d5_2411st Source Corp: pg 44
https://www.sec.gov/ix?doc=/Archives/edgar/data/34782/000003478223000111/source-20230630.htm#i84fa2e54738246cba7816586aeaea085_142among others as well.
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My PSM tagged this section of my disclosure "none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K)" with the following concepts: Rule 10b5-1 Arrangement Adopted (Flag); Rule 10b5-1 Arrangement Terminated (Flag); Non-Rule 10b5-1 Arrangement Adopted (Flag); and Non-Rule 10b5-1 Arrangement Terminated (Flag), each of which have a False fact value and a QTD fiscal date. I could not find guidance on which tags should be used but this makes sense to me. These tags are only available in the updated taxonomy.
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Donald Smith Yes, you still have to update to the new taxonomy and tag the language that says you didn't have anything.
Vida Leimonas Yes, that statement needs to be tagged as well.
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Christine Dvorak ... thank you for providing this useful information. Did your PSM happen to clarify why they applied 4 tags to a single disclosure? While I understand the tagging, I am surprised that there was 4 applied to one disclosure.
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Jake Roldan This is what I was able to find out so far: "As for guidance or best practice, the current approach if you are explicitly disclosing "None" or "No activity" or something similar will be to utilize the four Boolean Flag concepts (True/False concepts) and set the XBRL Fact Value to 'False' for each. All four of these XBRL Facts can be added to any piece of text (i.e., can be tagged to the word "None") and then the XBRL Fact Value can be set to 'False' within the Fact Details panel on the right side of the screen. No other tagging would be necessary. Here are the four Boolean Flag concepts:
Rule 10b5-1 Arrangement Adopted [Flag]
Rule 10b5-1 Arrangement Terminated [Flag]
Non-Rule 10b5-1 Arrangement Adopted [Flag]
Non-Rule 10b5-1 Arrangement Terminated [Flag]"I think all 4 is used to indicate that no new plans took affect and nothing was terminated.
Thanks everyone for all responses, was very helpful in my search!
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Vida Leimonas ... thank you for your response. Can you site guidance references?
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Jake Roldan My CSM
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Did anyone find an answer to this question from JENNIFER BARTLETT?
"if I decide to add extended tags for "Effective Date" and "End Date," do I need to create a new section in the Editable XBRL outline to hold them?"
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