Insider trading is once again a focus of federal regulators. As a result, insiders and large shareholders of publicly traded corporations are faced with potential liability—and unwelcomed scrutiny—when trading in shares of public company stock. This is particularly true where there may be a question as to whether the individual was aware of any material, non-public information at the time a trade took place.
Section 10(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act) prohibits “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.” The Securities and Exchange Commission has relied on Section 10(b) in prosecuting enforcement actions for insider trading cases which involve the purchase or sale of a security on the basis of material non-public information. However, an individual or entity possessing material non-public information may still trade in a public company’s securities if such trades are made pursuant to a 10b5-1 plan.
Plan Requirements
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