US SEC considers new rules on business plans – SEC Chairman
By Katanga Johnson
WASHINGTON (Reuters) – The head of the United States Securities and Exchange Commission (SEC) said on Monday he had asked staff about the tightening measures of trading plans that companies use when selling shares that they have.
Gary Gensler said the regulation, known as the 10b5-1 rule, should be aimed at preventing company insiders from abusing these trading plans for huge profits at the expense of ordinary investors.
He added that staff should consider limitations on how those trading plans might be changed or canceled when company staff have access to material non-public information.
“When insiders or companies adopt 10b5-1 plans, no cooling off period is currently required before making their first trade,” Gensler told the Wall Street Journal’s CFO Network event. “I’m concerned that some bad actors may perceive this as a loophole to participate in insider trading.”
“Canceling a plan can be as important economically as completing an actual trade … because material non-public information could influence an insider’s decision to cancel a sell order.”
Trading plans provide a structured way for company insiders to buy or sell stocks without violating insider trading restrictions.
Insiders make plans in advance and use them to plan for future transactions, giving executives a defense against allegations of insider trading that would arise from having material non-public information that was undisclosed at the time of filing. a transaction.
Critics say the current safe harbor is vulnerable to abuse, allowing insiders to strategically beat the market through important, non-public information. SOEs sometimes disclose plans to mitigate the perception that executives are negotiating on non-public information. Many companies often keep plans in place in these cases, even if canceling a plan is not considered a corporate action.
Gensler said he has asked staff to consider stronger disclosure regarding the adoption, modification and terms of trading plans and limit the number of plans that insiders can adopt, including other reforms. potential.
Monday’s comments come after three Senate Democrats in February called on the regulator to refresh the rules https://tax.thomsonreuters.com/news/senate-democrats-call-for-tougher-10b5-1-trading-plan -restrictions who oversee these plans, which they say lack transparency while maintaining risks that undermine public confidence.
(Report by Katanga Johnson in Washington, edited by Jonathan Oatis and Matthew Lewis)