There has been significant discussion lately about the need to restrict or improve the disclosure of trades made by corporate executives under 10b5-1 plans. In late 2019, I co-authored a series for Corporate Counsel discussing why public companies should consider updating their insider trading policies and training (see below with links to the article series). In part three of the series, I discussed the regulatory focus on 10b5-1 plans, the stock trading plans that corporate executives routinely rely on to trade company stock.
Despite the legitimacy and legality of 10b5-1 plans, they have come under scrutiny by the media, academics and government officials for being subject to manipulation by corporate insiders. My article summarized two pieces of legislation that had been introduced in Congress seeking to require the Securities and Exchange Commission (SEC) to formally review the regulations governing 10b5-1 plans and determine whether additional trading restrictions were warranted.
Executive Trades Under 10b5-1 Plans Scrutinized
While these bills have stalled in Congress, government officials have continued to scrutinize executive trades made under 10b5-1 plans and call for additional restrictions on the scope and use of these plans. Two seniors SEC officials recently took the time to express concerns about 10b5-1 plans shortly before leaving their posts. In a speech on November 19, 2020, outgoing SEC Chairman Jay Clayton expressed concern about situations where trading occurs (or does not occur) around times that 10b5-1 plans are implemented, amended or terminated.