As expected from the Spring 2021 Regulatory Agenda, on December 15, 2021, the SEC proposed amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 (“Exchange Act”) to enhance disclosure requirements and investor protections against insider trading. Although there is a statutory framework, the laws surrounding insider trading are largely based on judicial precedence and are difficult to navigate. I last wrote about insider trading in 2014 (see HERE) but there have been many curves in the road since that time.
Since the adoption of Rule 10b5-1, courts, commentators, and members of Congress have expressed concern that the affirmative defense under Rule 10b5-1(c)(1)(i) has allowed traders to take advantage of the liability protections provided by the rule to opportunistically trade securities on the basis of material nonpublic information. Furthermore, some academic studies of Rule 10b5-1 trading arrangements have shown that corporate insiders trading pursuant to Rule 10b5-1 consistently outperform trading of executives and directors not conducted under a