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June 7, 2021

The SEC Moves to End Abusive De Facto Insider Trading by Corporate Executives via So-called Trading Plans

FOR IMMEDIATE RELEASE
Monday, June 7, 2021
Contact: Pamela Russell at 202-618-6433 or prussell@bettermarkets.com
WASHINGTON, D.C.—Dennis Kelleher, Co-founder, President and Chief Executive Officer of Better Markets, praised the Securities and Exchange Commission’s action today regarding ending abusive executive stock trading: 
SEC Chairman Gensler’s decision to re-examine the rules governing executive stock trading plans, also known as Rule 10b5-1 Plans, is long overdue. Executives have been able to game the system, including engaging in de facto insider trading, by creating, changing, and canceling these stock trading plans in secret and virtually at will. This is nothing less than an indefensible gaping loophole in the insider trading laws and effectively grant immunity to corporate executives, even when they knowingly engage in abusive if not insider trading based on material nonpublic information.
For 20 years, senior corporate executives have been allowed to set up pre-designed stock trading arrangements enabling them to buy or sell shares in the companies they manage while avoiding liability for insider trading. However, these plans lack transparency, and the rules are riddled with loopholes. For example, as the Chairman explained in his remarks today, there is no required disclosure surrounding the adoption, modification, and terms of these Rule 10b5-1 plans. Moreover, executives can cancel their plans at will. That can be extremely beneficial depending on where the company’s stock price is headed, which the executives usually uniquely know.  Chairman Gensler rightly flagged these concerns and a number of others that the SEC staff will now evaluate.
Reviewing and, hopefully, changing the rules on 10b5-1 Plans to require full, frequent and broad transparency while prohibiting executive trading abuses are just the latest welcome developments by the SEC in prioritizing investor protection and market integrity.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.
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