I’ve been hearing some pushback from the securities law community about the need for so-called 10b5-1 “reform.” Here are some of the pointed questions that people are asking me and each other:
– Where are the SEC cases against insiders for entering into these plans when they are tainted with MNPI – which would violate the 10b5-1 safe harbor requirements?
– Why are we all jumping on the “10b5-1 reform” bandwagon when the SEC itself hasn’t found evidence of wrongdoing with these plans — as is evidenced by the dearth of enforcement cases?
– Why are we letting academic studies not supported by any meaningful SEC enforcement demonize 10b5-1 plans that have been used by individuals looking to do the right thing re: portfolio diversification and by companies looking to do the right thing by returning value to stockholders via stock buyback programs?
On a related note, some securities law practitioners are also starting to take issue with the terminology of so-called “cooling off” periods – and refer to them as, more accurately, “just in case I’m tainted” provisions. Said differently, what are insiders “cooling off” from? Being ice cold regarding MNPI on 10b5-1 execution date? It’s not universal, but some in-house folks view this as a biased and inaccurate term and are concerned that it is coloring public perceptions.
– Liz Dunshee