A review by Debevosie & Plimpton of insider trading policies publicly filed by more than 60 companies, including the 30 largest S&P 100 companies based on market cap, revealed the following practice trends, among others:
Policy scope
- All policies apply to directors, officers, and all employees of the company and 87% also cover their family members.
- 84% apply to legal entities such as corporations, partnerships, and trusts whose securities transactions are controlled or influenced by covered persons.
- 74% apply to contractors, consultants, and other agents and third parties.
Covered transactions
- 92% of policies include restrictions on gifts; of those, 77% prohibit covered persons from gifting issuer securities while in possession of MNPI (material non-public information) or subject gifts to window periods or pre-clearance procedures.
- 92% of policies address stock options (policies vary).
- 37% of policies expressly address the vesting and settlement of equity awards, with 78% of those exempting the exercise or vesting of equity awards from the policy requirements.
- 21% of the 39% of policies that address the purchase and sale of stock within a 401(k) plan exempt purchases in company stock made via regular payroll deductions (applies only to companies with this benefit).
Blackout periods
- 95% of companies subject directors, officers, and other designated employees who have regular access to MNPI to regular quarterly blackout periods, while 10% subject all employees to quarterly blackout periods.
- 64% of quarterly blackout periods start earlier than three weeks before quarter-end and 24% start more than four weeks prior to quarter-end.
- 44% of companies end their quarterly blackout periods one full trading day after the release of earnings, while 34% end their periods after two full trading days.
Preclearance requirements
- 95% of policies have preclearance requirements.
- The vast majority of preclearance requirements cover directors and Section 16 officers, while others extend to other members of management and certain employees.
Prohibited conduct
- 94% prohibit hedging transactions | 87% prohibit short sales | 90% prohibit pledging securities as collateral for a loan and holding securities in margin accounts
Rule 10b5-1 plans
- 94% of policies address 10b5-1 plans.
- 71% require preapproval to enter a 10b5-1 plan
- 82% don’t address non-Rule 10b5-1 trading arrangements