The Securities and Exchange Commission today adopted amendments to strengthen its requirements under the Securities Exchange Act of 1934 aimed at preventing insider trading. The amendments include updates to Rule 10b5-1(c), which provides an affirmative defense to insider trading for parties that frequently have access to material nonpublic information, including corporate officers, directors and issuers.
Among other things, the amendments update the requirements for the affirmative defense, including imposing a cooling-off period before trading could commence under a plan, prohibiting overlapping trading plans and limiting single-trade plans to one trading plan per 12-month period. These changes may nullify current trading plans’ qualification for the safe harbor. Additionally, the changes add new and modified reporting requirements in periodic reports including 10-K and 10-Q filings as well as certain other reports that disclose material information.
In addition, the amendments also require directors and officers to furnish written certifications that they are not aware of any material nonpublic information when they enter into the plans and expand the existing good faith requirement for trading under Rule 10b5-1 plans.