November 16, 2022

Rule 10b5-1 in the Crosshairs: The Latest SEC and DOJ Interest

The SEC’s announcement of is fiscal 2022 Enforcement results notes the agency’s continued activity in addressing market abuse, which includes insider trading, and the importance today of data analytics in making those cases. As my colleagues at Morrison Foerster note in this alert, within the insider trading world, the SEC and the DOJ have been focused in particular on the use of Rule 10b5-1 plans. The alert states:

The SEC and DOJ are using data analytics to investigate unusual trading activity and potential abuses of Rule 10b5-1 plans. According to one news report, federal authorities are preparing to bring multiple cases. In October, one company disclosed that it had received subpoenas from both the DOJ and SEC seeking materials concerning the trading activities of a former Chief Executive Officer in 2019 and 2020.

The alert notes that the use of data analytics on Rule 10b5-1 plans to initiate investigations evokes a similar pattern of parallel civil and criminal actions brought by the DOJ and CFTC to prosecute “spoofing,” which involves illegal trading practices used to manipulate the commodities market.

– Dave Lynn