Companies must review 10b5-1 plans

The SEC is under pressure to step up investigation of possible 10b5-1 abuses.

Few things will motivate investigators like media coverage suggesting they have fallen down on the job. In this case, the WSJ ran some interesting articles that "found profitable and well-timed trades by more than 1,400 executives."

The companies in question said that they didn't do anything wrong, but there is plenty of smoke here for investigators to waft through. The issue is if 10b5-1 plans are being used to harbor trading that effectively allows executives to get around insider trading laws, by artfully scheduling windows during which executives can transact. We may well see some prosecutions--and settlements.

In many ways, this is reminiscent of the stock options grant date controversy, which led to many settlements. All this suggests that companies need to review their plans and take appropriate steps to ensure that they cannot be misinterpreted by investigators, should the plans be formally reviewed. As usual, self-reporting of any possible abuses will be viewed in an appropriate light as will steps to mitigate possible problems ahead of formal enforcement action.

For more:
- here's some background