Citing a number of alleged abusive Rule 10b5-1 plan practices among healthcare and other executives, Senate Banking Committee members Elizabeth Warren (D-MA), Sherrod Brown (D-OH), and Chris Van Hollen (D-MD) urged SEC Acting Chair Allison Lee to review and reform (or facilitate the reform of) the SEC's 10b5-1 policies. Suggested reforms include mandating a four-to-six month waiting period between plan adoption or amendment and the commencement of trading under the plan; requiring public disclosure of the content of the plan to provide information to investors and promote stronger SEC oversight; and expanding the short-swing profits rule to cover profits obtained from 10b5-1 plan stock sales following disclosure of material information that cause the company's stock price to decline immediately following the disclosure.
The letter, which references former SEC Chair Jay Clayton's recommendation of a mandatory waiting period after adoption, amendment, or termination of a plan before trading may begin or recommence (see our report on that here: "Good Governance: Insider Trading Policies & Practices"), seeks Acting Chair Lee's response to a series of questions by February 22.
See Sen. Warren's release; these posts from Jim Hamilton’s World of Securities Regulation and Cooley; our recent reports: "Rule 10b5-1 Plan Trading Plans: Primer" and "Rule 10b5-1 Plans: Best Practices" and additional information & resources on our Insider Trading/Section 16 page. This post first appeared in the weekly Society Alert!