US Securities Regulators Strengthen Rules on Insider Trading and Share Buybacks by Companies

▲Gary Gensler, SEC Chairman [Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The U.S. Securities and Exchange Commission (SEC) has unveiled a proposal to strengthen regulations related to insider trading and share repurchases.

According to major foreign media on the 15th (local time), the SEC released a revised proposal to tighten the procedural rules (10b5-1 plans) that allow executives of listed companies to trade their own shares without being suspected of insider trading.

The revision, expected to be finalized next year through a vote by SEC commissioners after public consultation, requires executives of listed companies to disclose every time they establish or modify a share trading plan and to set a 120-day period between the adoption of the plan and the first trade.

For corporate share repurchases, a 30-day period must be set between the adoption of the plan and the first trade, and insiders are prohibited from establishing multiple overlapping share trading plans.

Current regulations require executives to pre-plan the timing and volume of sales to prevent trading based on insider information, but they allow the plan to be created on the day of sale or modified later for reasons unknown to outsiders.

As a result, even when executives of listed companies sell shares according to these rules, insider trading suspicions have occasionally been raised in some market circles.

Separately, the SEC changed the disclosure timing of share repurchase information, which was previously required quarterly, to be disclosed on the next trading day immediately after the transaction occurs.

Additionally, it requires disclosure of whether company executives traded shares within 10 trading days after announcing share transactions.

Gary Gensler, SEC Chairman who has advocated for regulatory strengthening since his appointment in April, pointed out in a statement that the core issue was that insiders regularly obtain material information unlike ordinary investors.

He explained that this revision was prepared to address such issues and ensure fair trading in the market.

Besides this, the SEC has strengthened regulations on money market funds (MMFs), which carry structural risks, and revised ambiguous rules on swap transactions that caused the so-called 'Archegos incident' to require disclosure of transaction details.

Earlier, in March-April this year, Archegos Capital Management, a family office of Korean-American investor Bill Hwang, caused about $10 billion (approximately 11.8 trillion KRW) in damages to financial institutions that lent money after the stocks purchased with funds secured through total return swaps (TRS) and contracts for difference (CFD) plummeted.

This content was produced with the assistance of AI translation services.