Rule 10b5-1 plans are one of the “great divides” between those of us who are lawyers for public companies and literally everyone else who follows public company issues. Most of us are borderline paranoid about crossing the t’s & dotting the i’s to make sure these plans provide the protection they’re supposed to provide (we even have an 87-page handbook devoted to that!). Most of them think these plans are a total scam – and point to the windfalls reaped by execs at Pfizer & Moderna for trades under 10b5-1 plans that seemed particularly well-timed to coincide with positive COVID-19 vaccine news.
That divide is one reason why I was kind of surprised by a recent Glass Lewis blog offering up some thoughts on “best practices” for 10b5-1 plans. These include typical suggestions like “cooling off” periods & public disclosure – but as this excerpt notes, the ultimate goal of these and other best practices is to provide transparency about the plan and its implications:
Other forms of best practice include avoiding the use of multiple, overlapping plans, avoiding short-term plans (most plans are six months to two years) and avoiding making changes to existing plans. All of these best practices help simplify the flow of publicly available information and present a clear way for insider trading rules to be followed. They help to avoid situations where executives are put into the spotlight, as was the case for Pfizer and Moderna – and ensure that when things do go public, the market has the information it needs to put things in context.
Now, since the blog’s title is “Operation Warp Pay,” I expected this discussion of best practices to be followed by a smackdown of the trading by the execs of these pharma companies. Surprisingly, that wasn’t the case. While the media reaction to Pfizer & Moderna’s 10b5-1 trading plans suggest that more could have been done on the transparency front, Glass Lewis concludes that the trades were essentially benign examples of lawful transactions under Rule 10b5-1.
-John Jenkins, TheCorporateCounsel.net February 5, 2021
