On April 25, 2025, the staff (the “Staff”) of the U.S. Securities and Exchange Commission’s Division of Corporation Finance (the “Division”) announced several new, withdrawn or revised Compliance and Disclosure Interpretations, all relating to Exchange Act Rule 10b5-1, covering trading “on the basis of” material nonpublic information as it relates to insider trading. In all, the Staff revised or withdrew 23 CDIs and issued two new CDIs. The majority of these changes were non-substantive, generally to ensure that the CDIs correctly and completely addressed current Rule 10b5-1 requirements, following its amendment in 2022.
Revised and Withdrawn CDIs
The Staff made identical changes to the CDIs below, clarifying that Rule 10b5-1 applies to the scenario detailed in each CDI at “a time when [the individual in question] is not aware of material nonpublic information and satisfies all applicable conditions of Rule 10b5-1(c)(1)(ii),” (emphasis added). Among other things, these conditions include that the plan or contract to purchase or sell securities was entered into in good faith, that the person who entered into the contract or plan has acted in good faith with respect to the contract or plan, and that such person will abide by a cooling off period between entering into the plan and completing transactions thereunder.
| 120.03 | 120.04 | 120.05 | 120.06 | 120.07 |
| 120.08 | 120.09 | 120.10 | 120.11 |
The Staff also revised or withdrew, as applicable, the following CDIs to reflect the 2022 rule amendments:
| CDI | Revisions |
| 120.01 | Updated to reflect Rule 10b5-1(c)(ii)(B) cooling off periods. |
| 120.02 | Withdrawn; beginning in April 2023, Form 144 filers were required to check a box indicating that a reported transaction was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). |
| 120.12 | Updated to reflect that, when a written trading plan does not specify the dates when a non-discretionary limit order will be in force, the conditions of Rule 10b5-1(c)(1)(ii) apply when an individual instructs a broker to place a non-discretionary limit order. |
| 120.15 | Clarifies that a market order to sell securities outside of a written trading plan would not affect the availability of the written trading plan defense for sales under the written trading plan; however, the market order would not be an additional contract or plan that would qualify for the affirmative defense under Rule 10b5-1(c)(1) for purchases or sales of the issuer’s securities on the open market under Rule 10b5-1(c)(1)(ii)(D). |
| 120.16 | Reflects codification of Rule 10b5-1(c)(i)(iv), providing, in part, that modifications to the amount, price, or timing of the purchase or sale of the securities underlying a Rule 10b5-1 plan is a termination of the plan and the adoption of a new plan. Similarly, the Staff withdrew CDI 120.19, which stated, in part, that the cancellation of one or more plan transactions would be a modification of the plan, which would terminate that plan, now codified under Rule 10b5-1(c)(i)(iv). |
| 120.18 | Clarified that termination of a plan or cancellation of plan transactions could affect the availability of the Rule 10b5-1(c) defense for prior plan transactions if it calls into question whether the plan was “entered into in good faith and not as part of a plan or scheme to evade” the insider trading rules and whether the person who entered into the plan has acted in good faith with respect to the plan within the meaning of Rule 10b5-1(c)(1)(ii)(A), in accordance with amendments (emphasis added). |
| 120.21, 120.22, 120.23 | All revised to reflect the impact of the amendments on certain transactions in an employee’s 401(k) plan, where the 401(k) plan allows employees to transfer the assets in their accounts among funds within the plan (including the employer stock fund) through fund-switching transactions. |
| 220.01 | Withdrawn; guidance regarding transfers of plan transactions to a different broker is codified in Rule 10b-5(c)(1)(iv). |
In a few of these CDIs, the Staff also updated references to the correct section of Rule 10b5-1. The Staff updated rule references only in CDIs 120.14, 120.24 and 220.02.
New CDIs
The Staff also adopted two new CDIs. CDI 120.32 applies when a company sponsors a 401(k) plan that permits both employer and employee contributions to be invested through a self-directed “brokerage window.” The counterparty to the self-directed “brokerage window” transaction will be an open market participant, so instructions for such a “brokerage window” transaction must satisfy all conditions of Rule 10b5-1(c)(1), including those applicable to purchases and sales of the issuer’s securities on the open market.
The second new CDI, 120.33, states, as background, that Rule 10b5-1(c)(1)(ii)(D)(3) provides an exception to the general requirement that an individual may not have multiple Rule 10b5-1 trading plans for open market transactions. This exception applies only to eligible sell-to-cover transactions, or contracts or plans covering the sale of securities to satisfy tax withholding obligations arising from the vesting of a compensatory award, where the insider does not exercise control over the timing of such sales. In the new CDI, the Staff defined “necessary to satisfy tax withholding obligations” as referring to “tax withholding payments that are calculated in good faith to satisfy the employee or director’s expected effective tax obligation solely with respect to the vesting transaction, consistent with applicable tax law and accounting rules.”
Find the updated Exchange Act Rules CDIs here.