2 ms·

IANAL, but a 10b5-1 plan (thanks for reminding me of the naming!) is an affirmative defense, that removes insider trading liability if a trade satisfies all of

by ethbr0 5y ago

IANAL, but a 10b5-1 plan (thanks for reminding me of the naming!) is an affirmative defense, that removes insider trading liability if a trade satisfies all of its conditions. Effectively, (1) the plan is created when one does not have material nonpublic information, (2) that it... "- Specified the amount of securities to be purchased or sold, price, and date; - Provided a written formula or algorithm, or computer program, for determining amounts, prices, and dates; or - Did not permit the person to exercise any subsequent influence over how, when, or whether to effect purchases or sales; provided, in addition, that any other person who exercised such influence was not aware of the material nonpublic information when doing so." [0] ... and (3) that the trade as executed did not attempt to subvert (2). So it's not really something you need to have your corporate legal agree to for it to be valid (although legal may require or encourage you to do so, to limit exposure of company officers botching it). You simply have to set up a plan that satisfies the test with your broker, then claim it as your defense if the SEC comes after you. A note on a napkin saying "Sell 5,000 shares 3 days before every earnings call, as long as the RSI is >50" would seem to suffice, provided you didn't subsequently meddle. [0] https://www.federalregister.gov/documents/2022/02/15/2022-01140/rule-10b5-1-and-insider-trading https://www.federalregister.gov/documents/2022/02/15/2022-01...

sidewndr46 5y ago
The training I went through explicitly laid out this scenario and explicitly classified it as insider trading if material nonpublic information is found that would make those trades desirable to execute. I've never heard of the SEC prosecuting someone for losing money due to insider trading. Again, this probably isn't the case legally. But it was enough for an extremely powerful corporation to deem it as such.
- ethbr0 5y ago
  You'd have to look up recent case law, as with all SEC rules, which may be what your company is referring to. But that's the explicit design of 10b5-1: that it provides coverage if all its requirements are satisfied. The SEC can charge you for making favorable trades according to a predefined plan, but they're going to have an uphill battle convicting you, if you kept your broker at arms length and didn't alter your plan beyond what was initially communicated.

by ethbr0 5y ago

sidewndr46 5y ago

The training I went through explicitly laid out this scenario and explicitly classified it as insider trading if material nonpublic information is found that would make those trades desirable to execute. I've never heard of the SEC prosecuting someone for losing money due to insider trading. Again, this probably isn't the case legally. But it was enough for an extremely powerful corporation to deem it as such.

ethbr0 5y ago
You'd have to look up recent case law, as with all SEC rules, which may be what your company is referring to. But that's the explicit design of 10b5-1: that it provides coverage if all its requirements are satisfied. The SEC can charge you for making favorable trades according to a predefined plan, but they're going to have an uphill battle convicting you, if you kept your broker at arms length and didn't alter your plan beyond what was initially communicated.