Rule 10b5-1 plans are back in the news. These plans are widely used by officers and directors of public companies to sell stock according to the parameters of the affirmative defense to illegal insider trading available under Rule 10b5-1, which was adopted by the SEC in 2000. Several recent Wall Street Journal articles suggest that some executives may have achieved above-market returns using the plans. These articles are reported to have drawn the interest of federal prosecutors and the SEC enforcement staff. In light of the renewed focus on 10b5-1 plans, companies should review their 10b5-1 policies for conformity with current best practices. I just received a memo from Practice Center Contributor and Davis Polk Partner Linda Chatman Thomsen providing an overview of 10b5-1 plans and some guidelines for their use. Here is an excerpt:
Rule 10b5-1 plans are no strangers to controversy. An academic study published in December 2006 found that, on average, trades under 10b5-1 plans outperformed the market by about 6% after six months. The resulting scrutiny did not lead to a significant uptick in insider-trading prosecutions, but did cause many companies to revisit their executives’ use of the plans. We suggested then that the potential for controversy was not by itself a reason to forego the benefits of employing 10b5-1 plans. We continue to believe that using properly designed plans is a good idea in many cases and can be at least as prudent as discretionary selling under normal insider-trading policies, with trading windows, blackouts and the like. Although regulators and the media may scrutinize trades made under 10b5-1 plans even when above board and done according to best practices, a well-thought-out and implemented 10b5-1 plan may help a company and its executives avoid or ultimately refute accusations of impropriety. (more…)
We are pleased to share the most recent edition of the Simpson Thacher Securities Law Alert, edited by litigation Partners Jonathan Youngwood, Peter Kazanoff, and Paul Gluckow. The following is a summary of the December 2012 edition of the Alert:
This month’s Alert addresses a Sixth Circuit decision affirming dismissal of negligent misrepresentation claims against three major rating agencies in connection with mortgage-backed securities, as well as a Southern District of New York opinion addressing the standard for remote tippee liability in insider trading prosecutions. We also review ten of the most notable circuit court decisions of 2012.
To view and print the full Securities Law Alert, please click here.
Today we continue our bi-weekly installment shining a light on the best of the corporate and securities blogosphere. Highlights include corporate political spending, the rising importance of the CCO, cybersecurity and more. If there are any corporate or securities blogs you think should be highlighted by our Top 5, please comment on this post and we’ll check them out!
1) The Corporate Counsel: The World’s Largest Holiday Disclaimer 2012 Version - Sometimes even lawyers just have to sit back and laugh at themselves. In this post, Broc Romanek blogs about the world’s largest holiday disclaimer and provides links to some laugh-out-loud lawyerly holiday greetings.
2) FCPA Compliance & Ethics Blog: The CCO: Co-Equal to the General Counsel in the Eyes of the DOJ - One of the items that the DOJ has increasingly focused on in its enforcement actions is the role of the Chief Compliance Officer and whether this position has adequate staffing and resources to accomplish its mandated tasks in a minimum best practices compliance program under the FCPA. In this post, Thomas Fox discusses some recent DPAs and NPAs that shed light on what government expectations are for this increasingly important role. (more…)