For the last two decades, officers and directors at U.S. public companies seeking to trade illicitly on inside information had an almost infallible get-out-of-jail-free card, the Wall Street Journal reported. All they had to do was use prearranged trading plans when they bought and sold their companies’ shares. The odds the government would target them for enforcement actions were slim. It was an unintended consequence of a regulation adopted in 2000 called Rule 10b5-1 that academic research shows was abused by some executives. That regime is about to change. A new Securities and Exchange Commission rule promises to remove many of the loopholes that allowed corporate insiders to hide behind these trading plans. For most U.S.-listed companies, new disclosure requirements will kick in April 1. Among the highlights: Officers and directors will have to wait at least 90 days after starting or modifying a 10b5-1 plan before they can trade under the arrangement. The forms used to report their trades will include mandatory checkbox disclosures showing whether they were using such a plan, as well as the plan’s adoption date. The companies, too, will have to disclose the substance of 10b5-1 plans in their quarterly and annual reports.
