Editor's Note: As noted in last week's Society Alert, the Society Alert is on hiatus this week during the Society's National Conference. In the interim, I am featuring noteworthy, recent Q&A (on an anonymous basis) from our invaluable Society Huddles.
Question: Does your company have a pre-clearance practice for Section 16 Insiders? If so, how long is the pre-clearance, and what does that pre-clearance cover (for example, material non-public information, short-swing, other)?
This question generated a lot of activity and many excellent answers, including:
- We require all Section 16 officers to pre-clear any trading in any company security. Approval is good for 48 hours. Legal and compliance evaluate all requests from all perspectives (MNPI, short-swing, stock-ownership guidelines, etc.).
- We have a regular trading blackout period for our Directors and management levels from just below the VP level and above beginning on the 15th day of the last month of a quarter through 48 hours after our earnings release is issued. When we are not in blackout, before trading in company securities (including charitable gifts and trading in the company stock fund in the company 401K Plan), a director or Section 16 executive officer is required to clear the trade with the General Counsel or the Corporate Secretary to ensure there are no blackout or Section 16 filing issues.
- Our pre-clearance request must be submitted three days in advance of proposed transaction. If approved, the insider has seven calendar days to complete the transaction or until the next regular blackout period. If the trade is not completed within that time, they must request pre-clearance again. Our regular blackout periods begin two weeks prior to quarter-end, and end upon completion of the second full trading day after public announcement of earnings for the quarter. The policy applies to material non-public information and short-swing profits.
- We require all Section 16 insiders to pre-clear their securities transactions, including adoption of a 10b5-1 plan. Pre-clearance is valid for five business days, but always with the caveat that it could end sooner due to new MNPI. Before granting pre-clearance, I always consider compliance with our blackout periods, short-swing trading, and stock ownership guidelines. Each quarter when we release earnings, I send an email to everyone subject to the blackout period, telling them when the window will open. I also include a reminder regarding the pre-clearance requirement for certain employees, and I attach our pre-clearance request form.
- We require all Section 16 insiders to pre-clear and to trade (or enter into a trading plan) in open windows. They must first complete a checklist. They deliver that signed checklist to me. I then run through my own checklist, which includes things like checking compliance with share holding guidelines, notifying a few people of the impending trade, etc. Trades must be completed within two business days of pre-clearance or the individual must complete another checklist. While we make it clear that Form 144 filings are the individual's responsibility, we always check that closely to ensure it gets done, if needed.
Access additional information and resources on our Insider Trading topical page.
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