We recently reported on amendments to Rule 10b5-1 (“The SEC Buries the Lede on Rule 10b5-1 Amendments”), noting that in saying that the amendments “modernize” the rule the SEC may have made a misstatement, if not a material one.
However, we did not point out that as part of the so-called “modernization,” the SEC threw in an amendment of the rules under Section 16 of the Exchange Act. Specifically, when the new rules take effect in April 2023, gifts of securities that can now be reported on Form 4 on a voluntary basis (but not within two business days) or on a deferred basis on Form 5 will have to be reported just like any other transaction – i.e., within two business days on Form 4.
It is not clear what, if anything, this change has to do with Rule 10b5-1; in fact, there seems to be no connection at all, other than to provide another example of the SEC’s distrust of corporate America.
The SEC didn’t exactly hide this change – it was noted in the Fact Sheet that accompanied the adopting release – but given the lack of any relationship between this change and the extensive amendments of Rule 10b5-1, I wouldn’t be surprised if it’s overlooked. So if you didn’t see this lump of coal in your 10b5-1 Christmas stocking, you can be forgiven. Just don’t compound it by overlooking the change once it takes effect.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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