Rule 10b5-1, Insider Trading: Form 4 and 5 disclosure changes and Form 144 deadline extended

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5 disclosure changes and Form 144 deadline extended


Insider Trading Arrangements and Related Disclosures, a new SEC rule, implements cooling-off periods for directors and officers to minimize potentially inappropriate trading and new disclosure requirements for companies and their insiders. SEC Chair Gary Gensler stated that the amendments “will help close potential gaps in our insider trading regime. The core issue is that company insiders regularly have material information that the public doesn’t have.” The amendments to Rule 10b5-1 governing insider trading were adopted by the SEC on Dec. 14, 2022.

Rule 10b5-1 compliance

To help prevent insider trading, the SEC requires Form 144 to be filed when an employee of a publicly traded company wants to sell $50,000 or 5,000 or more shares within a three-month span. However, as previously mentioned, the SEC identified gaps, leading to the Rule 10b5-1 amendment. 

This final SEC rule provides affirmative defenses to trading on the basis of material nonpublic information in insider trading cases. The amendments add new conditions to the existing insider trading rules which are designed to address potential abuse to trade securities opportunistically based on material nonpublic information. 

To be in compliance, companies, and corporate insiders must understand this complex array of disclosure and technical changes including: 

  • An issuer’s insider trading policies and procedures
  • The adoption and termination (including modification) of plans that are intended to meet the rule’s conditions for establishing an affirmative defense
  • Director and executive compensation regarding equity compensation awards made close in time to the issuer’s disclosure of material nonpublic information

The changes listed above for issuers will require Inline XBRL tagging in their corporate filings. 

Section 16 disclosure and technical changes on Form 4 and 5

On March 20, 2023, the SEC will implement EDGAR Release 23.1 which will include changes related to Section 16 reporting.

Due to Rule 10b5-1, Forms 4 and 5 will be updated to include a new checkbox to allow filers to identify whether the reported transaction was subject to a contract, instruction, or written plan. While EDGAR will be updated on March 20, 2023, to support the new checkboxes, filers will be required to comply with the new disclosure filings beginning on or after April 1, 2023. 

New check box: Form 4

□ Check this box to indicate that a transaction was made pursuant to a contract, instruction or written plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).

New check box: Form 5

□ Check this box to indicate that a transaction was made pursuant to a contract, instruction or written plan for the purchase or sale of equity securities of the issuer that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).

In addition to checking the new affirmative defense box to indicate that the Form 4 or Form 5 reports applicable transaction activity, filers should also “provide the date of adoption of the Rule 10b5-1(c) plan in the “Explanation of Responses” portion of the Form” (see Instruction 10 of each Form). 

Finally, the new SEC rule requires gifts of bona fide equity securities must be reported on Form 4 instead of Form 5 effective February 27, 2023. 

Form 144 filing deadline change, and Forms 3, 4 and 5 assistance

The SEC released a final rule extending the filing hours to receive a same-day filing date on Form 144 to 10 pm EST. These filing hours align with current Section 16 reporting for corporate insiders on Forms 3, 4 and 5.  Beginning March 20, 2023, Forms 144 and 144/A can be submitted, accepted and disseminated until 10 pm EST. 

SEC Connect is our end-to-end SaaS platform that keeps Rule 10b5-1 compliance simple, including Forms 3, 4 and 5 and Form 144. It is also an irreplaceable platform when filing Form D, Form 13F and even Schedule 13D and Schedule G.  

SEC Resources

SEC Fact Sheet:

Insider Trading Arrangements and Related Disclosures SEC Final rule:

Extending Form 144 EDGAR Filing Hours SEC Final rule: 

Jennifer Froberg - Sr SEC Product Specialist

With over 15 years of industry experience in the SEC regulatory landscape, Jennifer supports and advises clients in how to get their filings right. Part of a Toppan Merrill team of EDGAR experts who provide practical compliance expertise in a variety of subjects, Jennifer focuses on analyzing the scope of SEC rulemaking, where the agency is headed and how regulatory changes will impact the filers, investors and the market. She has a particular focus on structured data and ESG initiatives.

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