Gibson Dunn’s review of the 49 insider trading policies filed as of June 30 pursuant to the new SEC rule revealed the following practice trends (based on express disclosure):
Policy scope
- 96% of policies apply to directors, officers, and all employees of companies and their subsidiaries and, in some cases, certain affiliates, and their family members.
- 82% apply to legal entities such as trusts whose securities transactions are controlled or influenced by company personnel and, in some cases, their family members.
- 63% apply to contractors and/or consultants.
Covered transactions
Company securities
- 86% include restrictions on gifts.
- 69% exempt exercises of options when there is no associated sale on the market.
- 59% exempt vesting and settlement of equity awards, such as RSUs and restricted stock.
- 51% exempt withholding of shares for tax purposes.
Other companies’ securities
- 96% specifically include some form of restriction on trading in the securities of another company when the person is aware of material nonpublic information (MNPI) about that company or its securities.
- 82% prohibit trading in the securities of another company when the person is aware of MNPI about such company that was learned in the course of or as a result of the covered person’s employment or relationship with the company.
- 88% subject directors, executive officers, and a designated subset of employees to regular quarterly blackout periods.
- 45% of quarterly blackout periods start approximately two weeks prior to quarter-end; 14% start three to four weeks prior to quarter-end, and 18% start four or more weeks prior to quarter-end.
- 51% end the quarterly blackout periods one trading day after the release of earnings, while 24% end the periods after two trading days.
Preclearance requirements
- Nearly all policies have preclearance requirements and nearly all preclearance requirements cover, at a minimum, directors and executive officers.
- 65% of policies subject a subset of the persons subject to blackout periods to the preclearance procedures, while 29% subject the same people to both.
- 96% prohibit hedging transactions | 96% prohibit speculative transactions | 90% prohibit pledging securities as collateral for a loan | 82% prohibit trading on margin or holding securities in margin accounts
- All policies address 10b5-1 plans.
- 86% don’t restrict who can enter into a Rule 10b5-1 plan so long as approval and other requirements are met.
- 12% of policies limit the use of 10b5-1 plans to directors and designated officers.
- 6% of policies require directors and designated officers to trade only pursuant to Rule 10b5-1 plans.