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
