The Future of 10b5-1 Trading Plans

As seen on Corporate Board Member’s Webcast

The SEC proposed rules to place further restrictions on 10b5-1 trading plans to mitigate or avoid potential abusive trading activity through these plans. Here’s what your board needs to know.

Has the SEC killed off Rule 10b5-1 trading plans? Fortunately, the short answer is no. But clearly, the Commission believes there is a need to review current guidance on Rule 10b5-1 trading plans and that action is required to mitigate or avoid potential abusive trading activity through these plans. Most anticipate that any adopted final rule will closely mirror the proposed rule. However, we do not anticipate that the final rule will undermine the use or effectiveness of trading plans.

CBM sat down with Don Kalfen, a partner with Meridian Compensation Partners, to discuss the new proposed rules and the potential impact the final rule will have on the use or effectiveness of trading plans. Don has more than 25 years of experience advising clients on a broad range of technical, regulatory and corporate governance matters effecting the design, implementation and administration of executive compensation arrangements.

Discussion questions include:

1. Why do executives of public companies implement 10b5-1 trading plans?
2. What restrictions would the proposed rule place on trading plans — in addition to existing restrictions?
3. Do you anticipate that these restrictions will undermine the use or effectiveness of trading plans?
4. To what extent have current market practices already evolved to mirror the proposed rule?
5. What is your advice for boards on some of the key questions they should be asking as they consider compliance issues for their existing trading plans or any changes they need to be prepared to make?