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Yes and no. >After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constit

Yes and no. >After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. The SEC stated that, despite the fact that 10b5-1(c) requires trades to be irrevocable, there can be no liability for insider trading under Rule 10b-5 without an actual securities transaction, based on the U.S. Supreme Court's holding in Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975).[0] Without knowing the 10b5-1 schedule you can't say if insider knowledge was used when executing the plan. The simplest and dumbest version of this would be unique individual sale plans for each share you own for every day of the year. You just cancel the ones you don't want to sell, until you do, and everything is legal. [0] https://en.wikipedia.org/wiki/SEC_Rule_10b5-1#A_possible_loophole:_canceling_plans https://en.wikipedia.org/wiki/SEC_Rule_10b5-1#A_possible_loo...

rembling 9y ago
Wow! Sounds like a loop hole to me.
- zeth___ 9y ago
  It's not a bug, it's a feature Congress refused to remove.
pmiller2 9y ago
Judges are not stupid. I doubt this would fly in an actual court.
- zeth___ 9y ago
  Reality begs to differ. https://www.casebriefs.com/blog/law/securities-regulation/securities-regulation-keyed-to-coffee/rule-10b-5-in-connection-with-a-purchase-or-sale-of-a-security/blue-chip-stamps-v-manor-drug-stores/ https://www.casebriefs.com/blog/law/securities-regulation/se... >Held. (Rehnquist, J.) No. We embrace the holding of the Second Circuit in the 1952 Birnbaum case, 193 F2.d 461 (2d Cir. 1952). That rule demands that a plaintiff must be either a seller or a buyer to seek a remedy under 10b-5 and we reinforce this rule both through contemplation of legislative history and by policy deliberations. The SEC had attempted to get Congress to amend 10b-5 to contain “any attempt to purchase or sell a security”, but Congress had declined to do this. Congress desired to restrict 10b-5 to cases of “actual damage”, and without Birnbaum, evidence of damage would be too theoretical. Regarding policy considerations,the Birnbaum rulemay incite the offerees, knowing that they would not be subject to summary judgment would sue to push the corporate defendant to settle out of court,would lead to “strike suits”. The evidence presented by an offeree at trial would be too subjective, seeing as no objective criteria could assistin measuring plaintiff’s dependence on the prospectus. In conclusion, Manor Drugs has no contractual right to a Birnbaum rule. Manor Drugs was a member of a limited class, but permitting them to utilize the rule would lead to a breakdown of the Birnbaum rule. Reversed. And of course you can see Congress adding loopholes they can themselves use. The no insider trading rules are a joke.
  - dllthomas 9y ago
    TBH, I'm not sure I follow all of that, but it sounds to me like they're saying a trade must be made for there to be insider trading. I'm not sure I like that, but okay. But upthread your suggestion was "cancel the ones you don't want, until you do" - at that point, a trade has been made, so it's at least a different question.
    - zeth___ 9y ago
      Breaking it down: 1). Set up a 10b5-1 plan selling all your shares each day. 2). Set up a 10b5-1 plan that buys as many shares as possible. 3). Get insider information on the company. a). If good for company cancel plan from step 1. b). If bad for company cancel plan from step 2. c). If neither cancel both plans. 4). Profit.
      - dllthomas 9y ago
        Yeah, I got that part. The problem is that after 3a) or 3b), you have made trades. So "no trades were made, it can't possibly be insider trading" doesn't apply. It may be that the SEC would nonetheless honor the "it's not an issue if you're just following your plan" thing, but since obviously you're not just following your plan I wouldn't bet on it. I'd be interested to know of examples in either direction if anyone has been bold enough to try this.
        deleted 9y ago
        [deleted]
        zeth___ 9y ago
        You're not choosing to make a trade, you're choosing to cancel a trade. Both are things the FCC has said it will not charge anyone other as long as congress does not change the rules. Sorry to say but you're looking for a way to defend an indefensible system. If you want to see it in action look at what the Intel CEO did.
        9y ago
- s73v3r_ 9y ago
  Appellate and Supreme Court judges seem pretty eager to buy this kind of stuff, given many of the rulings over the past 15 years.

rembling 9y ago

Wow! Sounds like a loop hole to me.

zeth___ 9y ago
It's not a bug, it's a feature Congress refused to remove.

pmiller2 9y ago

Judges are not stupid. I doubt this would fly in an actual court.

zeth___ 9y ago
Reality begs to differ. https://www.casebriefs.com/blog/law/securities-regulation/securities-regulation-keyed-to-coffee/rule-10b-5-in-connection-with-a-purchase-or-sale-of-a-security/blue-chip-stamps-v-manor-drug-stores/ https://www.casebriefs.com/blog/law/securities-regulation/se... >Held. (Rehnquist, J.) No. We embrace the holding of the Second Circuit in the 1952 Birnbaum case, 193 F2.d 461 (2d Cir. 1952). That rule demands that a plaintiff must be either a seller or a buyer to seek a remedy under 10b-5 and we reinforce this rule both through contemplation of legislative history and by policy deliberations. The SEC had attempted to get Congress to amend 10b-5 to contain “any attempt to purchase or sell a security”, but Congress had declined to do this. Congress desired to restrict 10b-5 to cases of “actual damage”, and without Birnbaum, evidence of damage would be too theoretical. Regarding policy considerations,the Birnbaum rulemay incite the offerees, knowing that they would not be subject to summary judgment would sue to push the corporate defendant to settle out of court,would lead to “strike suits”. The evidence presented by an offeree at trial would be too subjective, seeing as no objective criteria could assistin measuring plaintiff’s dependence on the prospectus. In conclusion, Manor Drugs has no contractual right to a Birnbaum rule. Manor Drugs was a member of a limited class, but permitting them to utilize the rule would lead to a breakdown of the Birnbaum rule. Reversed. And of course you can see Congress adding loopholes they can themselves use. The no insider trading rules are a joke.
- dllthomas 9y ago
  TBH, I'm not sure I follow all of that, but it sounds to me like they're saying a trade must be made for there to be insider trading. I'm not sure I like that, but okay. But upthread your suggestion was "cancel the ones you don't want, until you do" - at that point, a trade has been made, so it's at least a different question.
  - zeth___ 9y ago
    Breaking it down: 1). Set up a 10b5-1 plan selling all your shares each day. 2). Set up a 10b5-1 plan that buys as many shares as possible. 3). Get insider information on the company. a). If good for company cancel plan from step 1. b). If bad for company cancel plan from step 2. c). If neither cancel both plans. 4). Profit.
    - dllthomas 9y ago
      Yeah, I got that part. The problem is that after 3a) or 3b), you have made trades. So "no trades were made, it can't possibly be insider trading" doesn't apply. It may be that the SEC would nonetheless honor the "it's not an issue if you're just following your plan" thing, but since obviously you're not just following your plan I wouldn't bet on it. I'd be interested to know of examples in either direction if anyone has been bold enough to try this.
      - deleted 9y ago
        [deleted]
      - zeth___ 9y ago
        You're not choosing to make a trade, you're choosing to cancel a trade. Both are things the FCC has said it will not charge anyone other as long as congress does not change the rules. Sorry to say but you're looking for a way to defend an indefensible system. If you want to see it in action look at what the Intel CEO did.
        9y ago
s73v3r_ 9y ago
Appellate and Supreme Court judges seem pretty eager to buy this kind of stuff, given many of the rulings over the past 15 years.