What US SEC - 17 CFR 240.10b5-1 Trading on the Basis of Material Nonpublic Information in Insider Trading Cases requires
17 CFR 240.10b5-1 titled 'Trading on the basis of material nonpublic information in insider trading cases' is the SEC rule that defines when a purchase or sale of a security constitutes trading on the basis of material nonpublic information for purposes of Rule 10b-5 under the Exchange Act, and provides the affirmative defense framework for preplanned trading arrangements. Paragraph (a) provides that the manipulative and deceptive devices prohibited by section 10(b) of the Act and Rule 10b-5 thereunder include the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information. Paragraph (b) provides the awareness standard: a purchase or sale of a security of an issuer is 'on the basis of' material nonpublic information about that security or issuer only if the person making the purchase or sale was aware of the material nonpublic information when the person made the purchase or sale. Paragraph (c)(1) provides the affirmative defenses for individuals who can demonstrate that, before becoming aware of the material nonpublic information, they entered into a binding contract, gave instructions, or adopted a written plan, that specified the amount, price, and date of the trade, that did not permit later influence over how/when/whether to effect purchases or sales, and that the purchase or sale was executed as originally specified. The 2022 amendments imposed cooling-off periods: 90 days for officers and directors (or two business days following disclosure of financial results, whichever is later, with a 120-day cap), and 30 days for persons other than the issuer. Paragraph (c)(2) provides a separate affirmative defense for entities that can show the individual making the trading decision was not aware of the material nonpublic information and the entity had implemented reasonable policies and procedures to ensure non-awareness.
Pillar: Banking & Global Finance · Authority: US Securities and Exchange Commission · Version: 1.0.0 · Last updated:
Primary source: https://www.ecfr.gov/current/title-17/section-240.10b5-1
SHA-256 integrity: 5d4eda2627dfa36dfc173cb67f57458bbd8364216caf4ffe3591a95cac999939
Primary Citations — 10 traced to source
- 17 CFR 240.10b5-1 - Trading on the basis of material nonpublic information in insider trading cases - regulatory text at https://www.ecfr.gov/current/title-17/section-240.10b5-1
- 17 CFR 240.10b5-1(a) - manipulative and deceptive devices include purchase or sale of a security on the basis of material nonpublic information in breach of a duty of trust or confidence
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