Are Safe Harbor Rule 10b5-1 Trading Plans Really Safe?

Posted on April 20, 2007 by Porter Wright

As recently reported in our firm’s Securities Law Alert, safe harbor Rule 10b5-1 trading plans for executives may no longer be safe. Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, recently warned that the SEC is “looking at” trading conducted under Rule 10b5-1 plans by company executives, and looking at those trades “hard.” Ms. Thomsen further declared that “[w]e want to make sure that people are not doing here what they were doing with stock options. If executives are in fact trading on inside information and using a plan for cover, they should expect the ‘safe harbor’ to provide no defense.” 

In light of the SEC’s recent focus on Rule 10b5-1 plans, it would be prudent for companies and executives to examine such plans and any trades made thereunder to preserve executives’ affirmative defense to insider trading charges.

Click here for the full text of the Securities Law Alert.

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