Senator Elizabeth Warren Told The Securities and Exchange Commission To Look Into Possible Corporate Executives Engaged In Insider Trading

By Jack Kelly


Democratic Senator Elizabeth Warren is concerned over how some corporations may game the system to enrich their executives. 


Warren sent a letter to the Securities & Exchange Commission asking for the regulatory agency to review the manner in which publicly traded corporations permit insiders to buy or sell stock in their company. 


Specifically, Warren wants the SEC to review something called “10b5-1 plans.” This arrangement allows corporate executives to buy and sell company stock at predetermined days in the future.


For example, a 10b5-1 plan would permit the CEO of the Widget Company International to sell 5,000 shares of their stock on the first Friday of every month. To avoid conflict, the plan document must make sure the individual is not aware of any material non-public information.  


According to Yahoo Finance News, “new research suggested existing regulations may actually help some people trade on material, non-public information.” Warren and other lawmakers are requesting the SEC to take a hard look at this matter to ensure that company C-suite executives aren’t finding ways around the system to engage in insider trading.


Warren wrote to acting SEC Chair Allison Lee saying that “These plans were designed to prevent insider trading, but new evidence indicates that executives — especially those in the health-care industry — are abusing these plans to obtain huge windfalls at the expense of ordinary investors.” 


For instance, Columbia Law School professor Josh MittsPublic claims that a study shows “companies disproportionately disclose positive news on days when corporate executives sell shares under predetermined Rule 10b5-1 plans.” 


As you can imagine, when good news is announced, the stock price rises and the corporate executive will get more money from the sale of stock.  


Mitts, concerned about this matter, said “These findings show the urgent need for policy reform in connection with 10b5-1 trading plans.”  


In an overall beefing up of regulatory oversight, it looks like Democratic lawmakers are going to be tough on accusations of insider trading committed by company executives.

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