In a
letter published Feb. 10, 2020, Senators Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Sherrod Brown (D-OH) requested the SEC review and reform policies covering 10b5-1 plans which provide corporate executives with a method to trade company shares. The content of the letter is very similar to the
bipartisan bill that passed the House almost unanimously in 2019 and calls for the following SEC actions:
- Describe how it ensures 10b5-1 plans are compliant with rules and regulations;
- List enforcement actions initiated in the last 5 years with regards to the plans;
- Consider implementation of a 4-6 month cooling off period between implementation or modification of a plan and the first permitted trade;
- Require that 10b5-1 plans be disclosed to the SEC prior to trading under the plan along with trades made; and
- Ensure that 10b5-1 adequately covers “short-swing” purchases and windfall profits that do not translate into long-term gains in the share price.
- The letter requested that the SEC respond by Monday, February 22, 2021 and we will update Subscribers on how (or if) such a response materializes.
Companies remain in a challenging environment with regard to stock sales.
Press coverage of such sales (the Warren letter highlights sales from healthcare and pharmaceutical executives, specifically) is almost universally negative, but enhanced disclosures carry risks as well. If an 10b5-1 plan sets certain price limits for sales, would those function as guidance about performance expectations? The Center will monitor the developments driven by the letter but would also appreciate Subscriber feedback on the issue.
