COMPLIANCE
SEC’s Proposed Amendments to Insider Trading Rules By VANESSA SCHOENTHALER
W
hether your company is public or private, if it issues securities, then Section 10(b) of the Securities Exchange Act applies to you. Section 10(b) and the rules adopted thereunder are the primary antifraud provisions of the federal securities laws. Collectively, they prohibit fraud or manipulation in connection with purchases and sales of securities. In December, following the recommendations of its Investor Advisory Committee, the SEC proposed a number of amendments to Rule 10b5-1, one of the
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most prominent rules adopted under Section 10(b). The amendments were published in the Federal Register on February 15, 2022, and the SEC is soliciting comments through April 1, 2022. The insider trading rules, and the case law surrounding them, prohibit purchases or sales of securities on the basis of material nonpublic information about a company in breach of a duty owed directly, indirectly or derivatively to that company, its shareholders, or the person who is the source of the material nonpublic information. A purchase or sale is deemed
to be made on the basis of material nonpublic information if the trader is aware — that is, if they know, consciously avoid knowing or are reckless in not knowing — that the information is both material and nonpublic. Rule 10b5-1 establishes an affirmative defense to liability for insider trading when a trade is made pursuant to a binding contract or written plan, namely a 10b5-1 insider trading plan (a trading plan), that is put into place while the trader is unaware of material nonpublic information. In recent years, there have been BACK TO CONTENTS
