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SEC chairman calls for new restrictions on executive stock trading plan



The Securities and Exchange Commission is drafting a proposal that would limit the schemes used by corporate insiders to avoid soliciting insider trading when buying or selling shares of their own companies.

SEC Chairman Gary Gensler, speaking on Monday at The Wall Street Journal’s CFO Network, said he was trying to revise rules governing the so-called 10b5-1 plan. Used to schedule future trades. The agreement allows management to defend against insider trading claims that may arise from having non-public information that was not disclosed at the time of trading.

Such plans often cause controversy because they do not need to be made public while insiders create them. Some investors said the plan was manageable because, for example, Executives can modify or cancel plans. Public companies sometimes disclose plans to mitigate perceptions that executives trade nonpublic information.

The SEC passed a 1

0b5-1 plan creation rule in 2000. Agency officials recognized weaknesses in the structure, former SEC Commissioner Joseph Grundfest said in 2013, but the agency has not updated the rules.

Gensler suggested Monday that the rule change is due. “In my opinion These plans create a crack in our insider trading system,” he said.

He added that regulators would “Make sure we are identifying and penalizing Plan 10b5-1 violations” under the current rules.

The SEC’s proposal could try to mitigate the risk of improper trading by requiring insiders to wait four to six months after the plan’s conception before trading. Set restrictions on canceling or modifying plans. Disclosure of any adoption and changes, and limit the number of plans that management can set up.

“Insiders can cancel plans when there is material non-public information,” Jensler said. “This seems to be upside down to me. It could also undermine investor confidence.”

The Council of Institutional Investors asked the SEC in 2012 and 2013 to regulate the 10b5-1 plans, saying they were violated.

Mr Jensler also discussed the changes to the Public Company Accounting Committee. The SEC last week fired PCAOB chairman William Duhnke, a Republican-appointed second-party commissioner in 2017. SEC people criticize the move

The PCAOB does not live up to its role and mission as an audit standards setter and enforcer, Gensler said. “I advocate for a new direction and revitalization of this important organization,” he said.

Gensler also signaled that the SEC is drafting new rules or guidelines for special-purpose recruiting firms. SPAC, which has raised more than $100 billion this year, is a deal structure that flourished last year as an alternative to initial initial public offerings. Is it good for individual investors who may not understand the complex structure and conflicts of interest?

Democratic Party appointee Gensler took control of the SEC in April. He chaired the SEC’s sister agency, the Commodity Futures Trading Commission. During the Obama administration, at the CFTC, he implemented rules aimed at reducing risk and increasing market transparency. swap After unregulated trading ignited the 2008 financial crisis.

The CFTC, under Gensler, pushed most standard exchanges into exchanges and required clearing house guarantees.

write to Dave Michaels at dave.michaels@wsj.com and Mark Maurer at mark.maurer@wsj.com.

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