“Plan B” for Rule 10b5-1 Plans?


Companies and their executives who utilize “Rule 10b5-1 Plans” to reduce the risks from insider trading claims when trading in company securities should evaluate plan use given recent increased scrutiny by the media and securities regulators. Since the adoption by the Securities and Exchange Commission (SEC) of Rule 10b5-1 (the Rule) in 2000, executives and directors at public companies have widely used plans to take advantage of the affirmative defense to insider trading suits created by the Rule. Plans can be particularly helpful as class action securities plaintiffs suing companies and insiders, in order to establish a key element of their case, often point to executive trading occurring in close proximity with the timing of company disclosures at issue in the case.

The Wall Street Journal recently conducted an investigation examining such plans and published a series of articles within the past several months callinginto question certain plan practices by some participants. The investigation found that of roughly 20,000 executives or trades sampled, around 1,500 of them recorded gains (or avoided losses) of 10 percent in the week following the trade, compared to only 800 who posted a loss of 10 percent. Executives who traded irregularly recorded average gains (or avoided losses) of over 20 percent in the week following their trade, a result that executives who traded on a more regular pattern were much less likely to achieve.

Originally published in the Orange County Business Journal - April 1-7, 2013.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Snell & Wilmer | Attorney Advertising

Written by:


Snell & Wilmer on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.