Table of Contents
I. SEC Rules and Regulations
II. SEC Staff Guidance
III. Scope & Content of Insider Trading Policies
1.
No One-Size-Fits-All
1-5
2.
Describe Who Is Covered
1-5
3.
Define “Insider Trading”
1-6
4.
Define & Illustrate “Materiality”
1-7
5.
Define “Nonpublic”
1-8
6.
Describe Types of Transactions Covered
1-8
7.
Prohibit Trading on Confidential Information About Other Companies
1-9
8.
State That You’re Responsible For Your Own Trading
1-9
9.
Address Confidentiality & Third-Party Sharing
1-10
10.
Address Investment Clubs
1-11
11.
Impose Quarterly Blackout Periods and/or Create Trading Window
1-11
a.
Describe Who’s Covered By Quarterly Blackout Periods
1-12
b.
Specify When Quarterly Blackout Periods Start
1-13
c.
Specify When Quarterly Blackout Periods End
1-14
12.
Impose Event-Specific Blackout Periods
1-15
a.
Whether to Require NDAs or Send Reminders (Or Do Nothing)
1-15
b.
Factors to Consider in Selecting an Approach
1-16
c.
Content of Confidentiality Reminders
1-16
d.
Treat Different Types of “Read In” Employees Differently
21.
Include Exception for Rule 10b5-1 Plans
1-26
22.
Address Violations of Law & Corporate Policy
1-27
23.
Board Typically Approves Policy & Amendments
1-28
24.
Challenges for Smaller Companies
1-28
25.
Develop Ongoing & Onboarding Training Programs
1-29
26.
Decide Whether to Post Policies Online
1-30
27.
Enforce the Policy
1-30
28.
Steps to Take If Insider Is Insider Trading
1-31
29.
Insider Trading Policy Doesn’t Apply to Company Transactions
1-32
IV. Common Questions & Our Analysis
1.
Expiring Options & Insider Trading
1-33
2.
Option Exercises During Blackout Permissible—But Remember Prospectus Obligations
1-33
3.
Insider Loan to Company During Blackout Likely Permissible
1-34
4.
Pre-Clearance Typically Valid for 3-5 Trading Days
1-34
5.
Use Confidentiality Agreements If Information Sharing Necessary
1-35
6.
Policy Should Apply to Consultants in Company’s Discretion
1-36
7.
Blackout Periods Should Apply to Former Directors & Officers
1-36
8.
Ramifications of Sale of Pledged Stock During Blackout
1-37
9.
Disclose Violation of Anti-Pledge Policy if Omission is Misleading
1-38
10.
Blackout on Option Exercises Before Merger
1-38
11.
Don’t Delegate Selection of Option Grant Date (Even During Window)
1-39
12.
Comply With Regulation BTR (Even If It Doesn’t Add Restrictions)
1-39
13.
No Need to Distinguish Buying From Selling In Policy
1-39
14.
Information That Moves Stock Price: Always Material?
1-40
15.
FINRA Inquiries Aren’t Limited To M&A
1-41
16.
Handling Budgets & Projections Without Blackouts
1-41
17.
Don’t Bury Material Information in Registration Statement
1-41
18.
Window Opening Typically Tied to Earnings Release
1-42
19.
Timeline for Disseminating Material Information
1-42
20.
Spouse Trading While Officer Has Material Nonpublic Information
1-43
21.
Policy Provisions for ESPPs
1-44
22.
Policy Provisions for ETFs
1-45
23.
Difficult to Enforce Policy Violations
1-46
24.
Civil & Criminal Penalties for Insider Trading
1-47
25.
Insider Sales During Company Repurchases
1-48
26.
Insider Sales Following Tender Offer
1-48
27.
Debt Repurchases Raise Different Insider Trading Issues
1-49
28.
Policy for Non-Reporting Company
1-49
29.
State Law Conflicts with Policy
1-50
30.
Assisting Insider With Filing Form 144
1-51
31.
Insider Gifts Warrant Caution
1-51
V. History
Appendix A—Model Insider Trading Policy
-
Model Insider Trading Policy
1-54
-
Purpose
1-54
-
Persons Subject to the Policy
1-54
-
Transactions Subject to the Policy
1-54
-
Individual Responsibility
1-55
-
Administration of the Policy
1-55
-
Statement of Policy
1-55
-
Definition of Material Nonpublic Information
1-56
-
Transactions by Family Members and Others
1-58
-
Transactions by Entities that You Influence or Control
1-58
-
Transactions Under Company Plans
1-58
-
Transactions Not Involving a Purchase or Sale
1-59
-
Special and Prohibited Transactions
1-60
-
Additional Procedures
1-62
-
Rule 10b5-1 Plans
1-64
-
Post-Termination Transactions
1-65
-
Consequences of Violations
1-65
-
Company Assistance
1-65
-
Certification
1-66
-
Model Memorandum to Directors and Executive Officers (and Other Designated Employees) (with Certification)
1-67
-
Pre-Clearance Procedures
1-67
-
Quarterly Trading Restrictions
1-68
-
Event-Specific Trading Restriction Periods
1-68
-
Exceptions
1-69
-
Post-Termination Transactions
1-70
-
Company Assistance
1-70
-
Certifications
1-70
-
Power of Attorney
1-70
-
Amended Insider Trading Policy and Procedures
1-71
-
Model Memorandum to Department Heads Regarding Certifications
1-72
-
Model Board Resolutions
1-72
-
Guidelines for Rule 10b5-1 Plans
1-73
