Elon Musk, founder of SpaceX and CEO of Tesla, waves as he arrives for a panel discussion at the Satellite Conference 2020 in Washington, DC, on Monday, March 9, 2020.
Andrew Harrer | Bloomberg | beautiful pictures
The Securities and Exchange Commission is considering stronger regulations to ensure CEOs and other corporate bigwigs don’t break insider trading laws as executive share sales continue to hit record levels in the last days of 2021.
The current set of rules creates a “safe haven” for insiders and companies that trade their equity as part of pre-announced portfolio management plans. By stating in advance when and how they intend to trade, executives protect themselves from future insider trading allegations.
SEC Chairman Gary Gensler said Wednesday that he’s worried the current rule, formally known as Rule 10b5-1 of the Exchange Act, isn’t going far enough. His future changes come after a five banners for executive share sales.
Gensler wants the SEC to consider issuing a 120-day cooling-off period for corporate officers and directors for any new or changed portfolio management plans. A similar amendment would introduce a 30-day cooling period for companies that trade in their own shares.
CEOs and group leaders including Microsoft’s Satya Nadella, Amazon founder Jeff Bezos and Tesla’s Elon Musk have sold a record $69 billion in shares in 2021. As of Nov. 29, sales insider sales are up 30% from 2020 and up 79% from the 10-year average, according to InsiderScore/Verity.
The majority of 2021 sales are focused on a few big sellers, including Musk and Bezos, who each sold about $10 billion.
Gensler’s proposed amendments would also prevent overlapping plans and restrict single commercial plans to 12 months at a time. Now, with the ability to declare multiple portfolio management plans at once, executives can choose among their favorites as they see fit over time, Gensler said. .
“The core issue is that these insiders often have important information that the public doesn’t. So how can they sell and buy stocks in a way that’s fair to the market?” Gensler said in prepared remarks.
“Over the past two decades, we’ve heard concerns and seen gaps in Rule 10b5-1 – gaps that today’s proposals would help fill,” he added. His amendments would force company executives to confirm that their proposed portfolio changes were made without material non-public information.
Ben Silverman, director of research at InsiderScore/Verity, says that record levels of executive stock sales come ahead of expected tax hikes and as markets hit new highs early in the year-end quarter. 2021.
– Bob Pisani and Robert Frank of CNBC contributed to this report.
https://www.cnbc.com/2021/12/15/sec-wants-stronger-insider-trading-rules-as-elon-musk-jeff-bezos-sell-billions-in-stock.html SEC wants stronger insider trading rules as Elon Musk, Jeff Bezos sell billions of dollars in stocks