Federal prosecutors launched a criminal investigation into whether corporate directors misused government-sanctioned trading plans to sell company shares for investment funds they run, the Wall Street Journal reported today. The U.S. attorney's office for the Eastern District of New York issued subpoenas requesting information from companies and funds cited in the Wall Street Journal that highlighted trading at three companies by directors who also run funds. The investigation is an outgrowth of another criminal probe, led by the U.S. attorney for the Southern District of New York and the Securities and Exchange Commission, into trading by company insiders. At issue are preset trading arrangements known as 10b5-1 plans, initiated by the SEC in 2000. The plans allow corporate executives and nonexecutive directors a way to sell some shares despite potentially having knowledge of nonpublic information about their companies, though such plans must be set up when the executive does not possess inside information. Prosecutors are interested in whether insiders are using such plans to shed their positions when they are privy to private information about companies. There have not been any allegations of wrongdoing.
