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“The stock sale is perfectly legal through a predetermined plan called Rule 10b5-1” Then why is this news.
by throw03172019 6y ago
“The stock sale is perfectly legal through a predetermined plan called Rule 10b5-1”
Then why is this news.
- jbverschoor 6y agoMany things are (still) legal. This is how regulations form.. Maybe there should be a new regulation: No major announcements may be made which directly impacts stock price X% before X months of the predetermined sales date.
- tomas789 6y agoThere are rules like that. For example executives cannot buy/sell stocks of their companies around the major announcements like financial results. Most of the time internal compliance department just sets a windows in which it is safe to do such transactions. As for the announcements one usually has to announce before the transaction is made (again compliance reasons) but then you don’t want to wait because the price tends to move against you with such announcements. This is why the real trades were likely executed just seconds after the announcement.
- kortilla 6y agoThere is no way to know what percentage an announcement will move a stock. Additionally, given that executives schedule stock sales all year long (most of their comp is stock), that effectively means no announcements can ever be made.
- codetrotter 6y agoBut in that case, should Pfizer wait an additional x amount of days before they announce the vaccine just because the CEO had a sell order planned? That wouldn’t be great for the world either I think. Or how did you mean?
- devdas 6y agoNo, even better would be to trigger a revaluation of all stock values on that date, and tax the income (as normal income, not capital gains) as if 100% of their stock was sold at that price. So if you hold 100 million shares valued at 1 USD/share, and sell 1 million at 2 USD/share, your tax liability will be assumed on you selling 100 million shares at 2 USD/share (or 200 million of regular income).
- SpelingBeeChamp 6y agoNext time you use an illustrative example, I suggest using the simplest figures you can. With respect to your example, it's exactly the same point and IMO easier to follow if you remove all instances of the word "million."
- kgwgk 6y agoI don't know about this particular case, but even if date of the sale was predetermined the date of the announcement was not. You can time announcements to make the price go up before you sell or go down after you did.
- celticninja 6y agoI guess it depends when the sell order was placed, i.e was the announcement in the diary first or the sale order?
- rurounijones 6y agoIt doesn't matter is I think the point. If you, as a CEO looking ot maximise personal profit, know a sale order data is coming up then you postpone or bring forwards the announcement to maximise the potential for that sale.
- cbhl 6y agoA good 10b5-1 should allow trades to be executed on your behalf even while you might hold non-public information. Useful for cash flow, so you can buy nice things. But if you control the date of the announcement to line up with instructions in your 10b5-1 plan, that would probably look more like insider trading despite the plan.
- deleted 6y ago[deleted]
- candiodari 6y agoWhich is how legal insider trading for management works these days. Because cancelling a 10b5-1 is perfectly legal at any time. So you could totally abuse the system by submitting 5 of them, designed to allow for different strategies, then cancelling some of them to pick specific trading strategies based on more recent insider info. And this works: cancelling them is normal, so that won't even attract much attention. It's a matter of executing well on this loophole.
- 6y ago
- saiya-jin 6y agoWell in a country with moral standard above the average, similar amoral yet technically legal behavior is frowned upon and can easily end political careers, as former chief of Swiss central bank found out [1] [1] https://www.reuters.com/article/us-switzerland-hildebrand-idUSTRE8080RK20120109 https://www.reuters.com/article/us-switzerland-hildebrand-id...
- nix23 6y agoThat was something else, his wife mysteriously knew that the swiss national bank binds the swiss frank to the euro..and he was the president of the national-bank. That is insider trading, and directly profiting/stealing from the capital that belongs to the swiss peoples.
- saiya-jin 6y agoHe was perfectly allowed to do that by his work contract (and so his wife, since in swiss marriage wealth is shared, and so are taxes here). That argument didn't work well in face of public and he was let go very quickly.
- nix23 6y ago>Hildebrand’s wife Kashya, a former hedge fund trader who now runs a Zurich art gallery, bought 400,000 Swiss francs ($418,000) worth of dollars on August 15, three weeks before her husband oversaw steps to cap the rise of the safe-haven franc. She later sold the dollars at a higher rate. AND >Hildebrand admitted the scandal had revealed shortcomings in the SNB’s internal regulations and code of conduct. So he self knew that it's not right to do that, he's not a normal President but the one from the Swiss national Bank. No one wants someone like that in such a position. AND >Christoph Darbellay, the Christian Democrat chairman of parliament’s economic committee that Hildebrand addressed, said it would push the SNB to tighten its rules. “People who can have an influence on the currency should keep their hands off,” he said.
- m0zg 6y agoIt did not occur to me until now that instead of timing their sales to announcements, senior execs could time announcements to their scheduled stock sales. Brilliant, in a way - a legal form of insider trading. In the meantime the lowly peons are often subject to "trading windows", and have no control over any material announcements. A bit of a disadvantage.
- redis_mlc 6y agoFor people not familiar with employee trading windows, it's not pretty. Often employees are completely distracted for a couple weeks, or coming in at 6 am in Calif. I've had meetings cancelled because "I'm too busy, the window is open this week." Otherwise they miss out until the next window, which could be 6 months later.
- mywacaday 6y agoI bought Pfizer stock yesterday, I guess it will likely drop today as it looks like the CEO could have planned for the sale at what he perceived would be the peak. True or not a lot of investors will believe it, the optics are very poor.
- secondcoming 6y agoBuy the rumour, sell the news
- throwaway2245 6y agoIt is logically impossible that this was predetermined (unplanned) in any reasonable sense, no matter what the law says.
- deleted 6y ago[deleted]
- Cthulhu_ 6y agoI don't know. It would be news if they found out he had actually BOUGHT stocks or stock options just before the announcements, because that would be a clear case of insider trading. But selling AFTER an announcement when the stocks are up is... what any shareholder would do and would be allowed to do.
- AntiImperialist 6y agoBecause it shouldn't be legal?
- known 6y agohttps://en.wikipedia.org/wiki/Front_running https://en.wikipedia.org/wiki/Front_running, https://en.wikipedia.org/wiki/Pump_and_dump https://en.wikipedia.org/wiki/Pump_and_dump are also illegal/immoral as https://en.wikipedia.org/wiki/Insider_trading https://en.wikipedia.org/wiki/Insider_trading
- economusty 6y agoTo get clicks and sell ads, you know that.