The conditions that the SEC has now added to Rule 10b5-1 plans, including the cooling-off period, the limitation on overlapping plans and the single trade limitation, have undoubtedly complicated the use of Rule 10b5-1 plans. The additional transparency around the use of Rule 10b5-1 plans raises their profile in a company’s SEC filings. There are some types of transactions that we historically relied on Rule 10b5-1 for that do not really work anymore, because of the imposition of a cooling off period and overlapping plan conditions. The SEC is now on record, in the adopting release and proposing release for the Rule 10b5-1 rule amendments, citing the negative academic studies and press about Rule 10b5-1 plans.
By all accounts, I think Rule 10b5-1 is a survivor, despite all of these headwinds. In my practice, insiders are still utilizing Rule 10b5-1 plans for the same types of planned transactions that they implemented before the amendments. While companies may be less likely to actually mandate the use of Rule 10b5-1 plans, they are also not actively discouraging the use of such plans. Brokers have integrated the rule requirements into their standard Rule 10b5-1 plans, and generally those changes have been accepted….
‘Enforcement 40’ for 2020
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