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Shearman & Sterling LLP Getting Camera Ready: Refreshing Insider Trading Policies Ahead of Mandatory Public Disclosure | 40 Getting Camera Ready: Refreshing Insider Trading Policies Ahead of Mandatory Public Disclosure Harald Halbhuber and Katya Bogdanov Insights Recent SEC Focus on Insider Trading Insider trading has been a focus of recent regulatory rulemaking and enforcement. In December 2022, the SEC adopted significant rule changes designed to curb perceived abuse of Rule 10b5-1, which allows insiders to avoid liability for trades executed under a pre- arranged plan that was put in place when they did not have material nonpublic information (MNPI). In a rare display of unity, all five SEC Commissioners voted to approve these changes. March 2023 saw the first ever insider trading prosecution based exclusively on the use of Rule 10b5-1 trading plans, when the Department of Justice (DOJ) charged the CEO of a health care company for his allegedly fraudulent use of such plans to trade company stock. 1 And just a few months ago, in June 2023, the SEC announced charges against 13 individuals, including corporate executives and insiders, in four separate insider trading schemes, with the DOJ bringing concurrent criminal actions against most of the defendants. 2 New Mandatory Disclosure of Insider Trading Policies Starting in 2025 In addition to changing the rules for trading plans, the SEC mandated greater transparency regarding companies' insider trading policies. A new rule adopted as part of the Rule 10b5-1 changes will require domestic and foreign private issuers 3 to disclose annually whether the company has adopted an insider trading policy applicable to its directors, officers 4 and employees, and if not, why not. In the case of domestic issuers, this rule also captures policies regarding trading by the company itself. Companies that have insider trading policies will need to file them as exhibits to their Form 10-K or 20-F. This disclosure and filing requirement will apply for the first time to the annual report covering the first full fiscal period beginning on or after April 1, 2023. This means that calendar year reporters will first be required to provide this disclosure and file their insider trading policies with the SEC in 2025, with the Form 10-K or 20-F for 2024. Insider Trading Policies: New Disclosure Requirements at a Glance Applicability: Domestic and foreign private issuers Requirements: • Annually disclose whether the company has adopted an insider trading policy applicable to directors, officers and employees, and in the case of a domestic issuer, the company itself, and if not, why not • File insider trading policy as exhibit to annual report on Form 10-K or 20-F Effective Date for Calendar Year Reporters: Annual Report on Form 10-K or 20-F for 2024, filed in 2025 1 See U.S. Department of Justice Press Release, "CEO of Publicly Traded Health Care Company Charged for Insider Trading Scheme," https://www.justice.gov/opa/pr/ceo-publicly-traded-health-care- company-charged-insider-trading-scheme (March 1, 2023). 2 See U.S. Securities and Exchange Commission Press Release, "Statement on Insider Trading Enforcement Actions Announced on June 29, 2023," https://www.sec.gov/news/statement/20230629 (June 29, 2023). 3 The rule amendments do not apply to multi-jurisdictional disclosure system (MJDS) filers. All references to foreign private issuers in this article exclude MJDS filers. 4 Unless otherwise specified, references to "officers" are to Section 16 officers of domestic companies and senior management of foreign private issuers.