August 2, 2010

The Need for Reviewing Your Rule 10b5-1 Plan

Here is something from Brink Dickerson of Troutman Sanders:

The standard 10b5-1 plan document recently was re-written by one of the major brokerage firms. It is better than their old form, but still not a good approach. I have several concerns with most broker-prepared 10b5-1 plans. First, while the rule is very simple in what a plan must include, the plans tend to ask for representations and other commitments from the executive that simply are not germane to having an effective plan.

I’m more troubled by what some of the plans ask from issuers. Issuers should be willing to verify the number and terms of outstanding options, and can commit to honoring option exercises against the payment of the exercise price, but should go no further. In particular, issuers should not commit to providing notices upon various corporate events. Brokers should get this information from customary exchange and market sources. The bottom line here is that Rule 10b5-1 plans are not the “issuer’s plans,” but the “executive’s plans,” and issuer involvement simply is not justified.

I am also is troubled by the representation that some of the plans contain that the executive will not disclose any non-public information to the broker. But what if the broker, through its investment banking operation, is executing a major transaction for the issuer? Still no disclosure? Of course not, but that is not how the plans read.

Transcript: “Evolving Insider Trading Policy and 10b5-1 Plan Practices”

We have posted the transcript for our popular webcast: “Evolving Insider Trading Policy and 10b5-1 Plan Practices.”

ISS Solicits Feedback for Its Policy Survey

As it has done the past few years, ISS is soliciting feedback ahead of announcing its policy updates for the 2011 proxy season. It’s shorter this year with just 29 questions, but the deadline is tomorrow even though the survey was posted late last week…

Our August Eminders is Posted!

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– Broc Romanek