On April 25, 2025, the SEC Staff issued two new Compliance and Disclosure Interpretations (C+DIs) with respect to Rule 10b5-1. Under the first (Qu. 120.32), the Staff advised that purchases and sales of issuer securities pursuant to a self-directed “brokerage window” under a company’s 401(k) plan are to be analyzed in the same manner as other open market purchases and sales by the plan participant for purposes of Rule 10b5-1(c) and will qualify for the affirmative defense of that Rule if the instructions for the transactions 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. Under the second, (Qu. 120.33), the Staff discussed that Rule 10b5-1(c)(1)(ii)(D)(3) provides an exception from the prohibition against having multiple Rule 10b5-1 plans for a plan providing for “sell to cover” transactions “necessary to satisfy tax withholding obligations arising exclusively from the vesting of a compensatory award.” The C+DI clarifies that this standard refers 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, as distinguished from the minimum tax withholding obligation imposed under the applicable tax rules.
Additionally, the Staff made changes and clarifications to a number of Rule 10b5-1 C+DIs. Links showing comparisons to the prior versions are provided below:
Question 120.12
Question 120.15
Question 120.16
Question 120.18
Question 120.21
Question 120.22
Question 120.23
The Staff also withdrew C+DI No.: (i) 120.02 [a Form 144 need not be modified to state that the representations are of the date that the plan was adopted, because the form includes that representation]; (ii) 120.19 [cancelling plan transactions is a modification of the plan, terminating it; any new plan must satisfy the requirements of Rule 10b5-1 (all facts must be considered to determinate whether the plan was established good faith and not part of a scheme to evade the prohibitions of the rule]; and (iii) 220.01 [when a broker goes out of business, plan transactions may be transferred to a different broker without being deemed to have cancelled the original plan and adopted a new plan if the transfer is timed so that there is no cancellation of any transaction scheduled in the original plan, and the new broker effects sales in accordance with the original plan’s terms in compliance with the rule].
Finally, a few additional small changes were made to some other Rule 10b5-1 C+DIs: (120.01; 120.03; 120.04; 120.05; 120.06; 120.07; 120.08; 120.09; 120.10; 120.11; 120.14; 120.24; and 220.02) to update rule references and/or include language specifying that satisfaction with the conditions of the rule is required.
This post comes to us from Arnold & Porter Kaye Scholer LLP. It is based on the firm’s memorandum, “SEC Staff Issues, Revises, and Withdraws C+DIs With Respect To Rule 10b5-1,” dated May 6, 2025, and available here.