2020 marks the 20th anniversary of the Rule 10b5-1 plan. During its two-decade history, it has provided an affirmative defense against allegations of insider trading by corporate insiders that trade their company’s stock, even while in possession of material non-public information at the time of trading, through plans that are set up in advance. It has also attracted its fair share of controversy following certain academic studies that indicated that executives with Rule 10b5-1 plans receive better returns than their colleagues at the same company. These findings and specific high-profile instances of apparent abuse by executives led to negative news coverage and the presumption that Rule 10b5-1 plans may be used as cover to trade while exploiting inside information. However, to date, there have been no meaningful regulatory or legislative changes to Rule 10b5-1 plans. SEC action against executives trading pursuant to Rule 10b5-1 plans has been effectively nonexistent, and, although plaintiffs have made some inroads, the use of such plans continues to be an effective affirmative defense in private litigation.
‘Enforcement 40’ for 2020
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