The SEC recently adopted final rules on the amendments to Insider Trading Arrangements and Related Disclosures. These rules require issuers to disclose insider trading policies and procedures in accordance with Rule 10b5-1. Introduced in 2000, the rule was designed to provide clarity around trading based on material nonpublic information. Now, with these newest amendments, companies will be required to disclose detailed 10b5-1 plans for directors and executives on a quarterly and annual basis.
Key forms impacted by the amended disclosure, which will require XBRL tagging, are included below. The Commission highly recommends using the latest version of the taxonomy, which is included in the 2023 US GAAP taxonomy. Details include:
- The quarterly narrative disclosure is required under Item 5 of Form 10-Q and Item 9b of Form 10-K. For the latter, disclosure only includes 4th quarter results.
- Issuers must disclose annually if they have adopted insider trading policies and procedures under Item 10 of Form 10-K, Item 16J of Form 20-F, and Item 7 of Proxy and Information Statements. For this group, the policy must be filed as an exhibit 19 to Form 10-K or an exhibit 11 to Form 20-F. For those who do not meet their criteria, the issuer must provide an explanation for why a policy was not adopted. It’s also worth noting that exhibits 19 and 11 are NOT required to be tagged in Inline XBRL.
- Annual tabular disclosure under Item 11 of Form 10-K and Item 8 of Proxy and Information Statements.
Now for the details on timing, the SEC has provided the following guidance, which is also available online here. Per this guidance, companies other than smaller reporting companies will be required to comply with the new disclosure and tagging requirements in Exchange Act periodic reports on Forms 10-Q, 10-K, and 20-F “in the first filing that covers the first full fiscal period that begins on or after April 1, 2023.” Therefore, the following compliance dates apply:
- December 31 fiscal year-end company: Quarterly disclosures must first be provided in the Form 10-Q for the period ended June 30, 2023, and should continue to be provided in the Form 10-Q for the period ending September 30, 2023, and the Form 10-K for the fiscal year ended December 31, 2023.
- June 30 fiscal year-end company: Quarterly disclosures must first be provided in Form 10-K for the fiscal year ending June 30, 2023.
- December 31 fiscal year-end company: Annual disclosures must first be provided in Form 10-K or 20-F for the fiscal year ending December 31, 2024.
- June 30 fiscal year-end company: Annual disclosures must first be provided in Form 10-K or 20-F for the fiscal year ending June 30, 2024.
As for smaller reporting companies, they must comply with the new disclosure and tagging requirements in the first filing that covers the first full fiscal period that begins on or after October 1, 2023. Therefore, the following compliance dates apply:
- December 31 fiscal year-end company: Quarterly disclosures must first be provided in Form 10-K for the fiscal year ending December 31, 2023.
- June 30 fiscal year-end company: Quarterly disclosures must first be provided in Form 10-Q for the period ending December 31, 2023.
- December 31 fiscal year-end company: Annual disclosures must first be provided in Form 10-K or 20-F for the fiscal year ending December 31, 2024.
- June 30 fiscal year-end company: Annual disclosures must first be provided in Form 10-K or 20-F for the fiscal year ending June 30, 2025. [May 25, 2023]
DFIN experts continue to closely follow these developments and are available to share our insights around the key elements, including details on timing, forms, tagging requirements, and more. We are also available to provide one-on-one guidance on what these amendments mean for your businesses. We look forward to hearing from you.
