Has the SEC Made 10b5-1 Trading Plans More Hassle Than They’re Worth? | Tarter Krinsky & Drogin LLP

The bigger question may be whether the SEC’s amendments have just made 10b5-1 trading plans more hassle than they are worth.

For example, prior to the amendments the SEC did not require a cooling off period between adopting and trading pursuant to a 10b5-1 plan. Instead, companies and brokerages developed their own policies, typically requiring 30-60 to days. By allowing flexibility, those with a legitimate motive for trading in the near term could still avail themselves of the affirmative defense provided by Rule 10b5-1(c). The SEC’s mandatory 90-day rule eliminates that flexibility, requiring insiders to wait a full three months before trading. An insider with a legitimate motive for trading sooner must now weigh the potential benefit of the affirmative defense against the cost of waiting out the mandatory cooling off period. Likewise, the insider must consider the new limitation that trades made under a 10b5-1 plan adopted at any given time will be the only trades eligible for the affirmative defense for the following year. Finally, the insider must consider whether the value of the affirmative defense outweighs the potential costs of public disclosure.

Another consideration is the cost both monetarily and administratively of complying with the amendments….

Source: Has the SEC Made 10b5-1 Trading Plans More Hassle Than They’re Worth? | Tarter Krinsky & Drogin LLP – JDSupra