December 2022
KPMG Insight: SEC’s final amendments to insider trading Rule 10b5-1 (unanimously adopted) are intended to address concerns regarding the trading activities and behaviors of “corporate insiders” of public companies who have access to material non-public information. The intent is to strengthen investor protections and confidence in the securities markets. The amendments are substantially similar to those proposed late in 2021. Companies subject to SEC regulation must ensure that practices are in place to safeguard against prohibited trading activities by “corporate insiders”, including directors, officers, and “persons other than directors, officers, or the issuer.” Similarly, they should review and modify current policies and practices regarding insider trading, compensation, and gifts of securities, as appropriate. Enhanced scrutiny of insider trading and broader conflicts of interest compliance risk programs, controls and governance should be anticipated in the near term as the rules go into effect and the new disclosure requirements are incorporated into companies’ financial and nonfinancial reports. In addition, though directed toward public companies, the rules and disclosures may also serve as a “roadmap” for other companies and government entities to update and enhance their own investment/trading policies and practices.
Concerns over trading activity based on material non-public information and other conflicts of interest have been raised in recent years in public companies, in private companies, and with respect to public officials. All entities should, therefore, look to re-review insider trading and conflicts of interest practices, with consideration given to limits and enhancing controls.