dChan - Q Origins Project Archive

'New' SEC rules target corporate insider trading-but lack any 'teeth' as usual

For the last two decades, officers and directors at U.S. public companies seeking to trade illicitly on inside information had an almost infallible get-out-of-jail-free card.

All they had to do was use prearranged trading plans when they bought and sold their companies’ shares. The odds the government would target them for enforcement actions were slim. (and will remain that way until Gary and his hacks at the SEC stop settling all the Financial cases) It was an unintended consequence of a regulation adopted in 2000 called Rule 10b5-1 that academic research shows was abused by ~~some~~ the bulk of those (FIFY) executives.

That regime is about to change…(no it won't-it will still be the wild-west-ENFORCE the rules don't just have them) A new Securities and Exchange Commission rule promises to remove many of the loopholes that allowed corporate insiders to hide behind these trading plans. For most U.S.-listed companies, new disclosure requirements will kick in April 1-(and again another example of making it look like the SEC is doing something-see below)

Among the highlights: Officers and directors will have to wait at least 90 days after starting or modifying a 10b5-1 plan before they can trade under the arrangement. The forms used to report their trades will include mandatory checkbox disclosures showing whether they were using such a plan, as well as the plan’s adoption date. The companies, too, will have to disclose the substance of 10b5-1 plans in their quarterly and annual reports. "Before the change occurred, you could have an executive utilize a $100 million 10b5-1 plan, and there would be no trace in public disclosures that they were utilizing such a plan," said Daniel Taylor, an accounting professor at the University of Pennsylvania and the co-author of a 2021 study on 10b5-1 abuses that was cited in the SEC’s final rule.

Some insiders were selling shares less than a month after adopting their plans, sometimes even the same day (plenty examples posted of this in QR over the last 5 years(, or adopting and initiating trading plans right before earnings announcements. Another trick has been to adopt multiple 10b5-1 plans and later selectively cancel the ones that wouldn’t work to the insider’s benefit. Potential abuses of 10b5-1 plans were the subject of a Wall Street Journal article in June that was cited in the SEC’s final rule. Under the old rule, corporate insiders were supposed to set up the plans only when they weren’t aware of any material, nonpublic information. Corporate insiders didn’t have to disclose that they were relying on such plans when they reported their trades, although many did anyway. The companies didn’t have to disclose the plans’ existence. The dearth of information often left investors wondering whether a top executive’s well-timed trades were too good to be legal.

Just as the old rule begot new manipulations, the new rule won’t eliminate them all. The SEC noted concern that some insiders might time market-moving disclosures around insiders’ prescheduled trading dates, delaying the release of bad news until after scheduled sales or accelerating the release of positive news so it comes out beforehand.

The SEC said its new rule addresses this by requiring that all users of 10b5-1 plans "must act in good faith." Mr. Taylor said that could be hard to enforce. "If the executive knows they have a scheduled sale and alters the timing of a bad-news disclosure to be one or two days after the sale, it may be very difficult for regulators to prove that the timing was altered for the purpose of his sale," he said.

An SEC advisory committee had recommended requiring more timely disclosures by companies of 10b5-1 plan adoptions and changes—within four days, rather than waiting for quarterly reports—which could help make manipulations easier to spot.The SEC declined.

The same committee also recommended requiring all U.S.-listed companies to follow the same insider-trading reporting requirements and use all the same disclosure forms. Under current rules, those filing requirements don’t apply to many overseas companies that trade on U.S. exchanges. Under the new rules, insiders at foreign filers still won’t have to follow the same disclosure rules for stock sales and purchases as insiders at U.S.-based companies.

https://www.foxbusiness.com/markets/sec-rules-target-corporate-insider-trading

So you can have all the "Rules" you want…that isn't the issue…it's actually enforcing them that has been the biggest problem and although it's a step in a positive direction and they could have done a WAY better job at this too however the SEC has to actually PROSECUTE cases in this area and stop settling all the other corporate malfeasance charges with huge payments with no one admitting anything

Literally the most useless three letter-agency we have…sure to get some arguments on that but they do N-O-T-H-I-N-G

The two biggest offenders that come to mind are Marc Benioff of SalesForce and Reed Hastings of Netflix..there are others* but those two are the poster boys for low cost option executions and sales

Marc Benioff SalesForce

https://www.secform4.com/insider-trading/1294693.htm

Reed Hastings Netflix

Insider Sales

https://www.secform4.com/insider-trading/1033331.htm

Steven Cohen, Ivan Boesky, Michael Milken, Jeffrey Skilling & Ken Lay-who famously "died" the day before he was supposed to go to jail (Enron) , Raj Rajaratnam (Galleon Group and another one who was made an example of), Phil Mickelson, almost the entire A level suite of execs at KPMG and yes Martha Stewart (but she opened her mouth one too many times and was made an example of)

Actually way too many to list here but with SEC rules (when they enforce them) it has to be 100% without ANY reasonable doubt-any good lawyer can create that in any case-and why the ones who are actually convicted are ones who are made examples of..in Michael Milken's case they still allowed him to be a "star"-even after his light sentence and went easy on him because Drexel, Burnham, Lambert actually held the huge Silver short legacy position before Bear Stearns had it and it was part of the Ivan Boesky shit so they kind of had no choice because Milken was Boesky's "Deep Throat"