Liyan Yang is a Professor of Finance at the Rotman School of Management, University of Toronto. This post is based on an article in the Journal of Financial Economics by Professor Yang, Professor Jun Deng, Professor Huifeng Pan, and Professor Hongjun Yan.
Regulating insider trading has long been a controversial issue, balancing the need for fairness and market integrity in financial markets against insiders’ practical needs to trade for non-informational purposes such as rebalancing and liquidity needs. Central to this debate is the U.S. Securities and Exchange Commission’s (SEC) Rule 10b5-1, which provides a legal safe harbor for corporate insiders to trade their company’s stocks under predetermined trading plans before possessing material nonpublic information (MNPI).
Recent controversies, such as the sales by executives of COVID-19 vaccine developers shortly after announcing breakthroughs, have once again highlighted concerns about the potential misuse of Rule 10b5-1 (see the recent Wall Street Journal article “Pfizer CEO Joins Host of Executives at Covid-19 Vaccine Makers in Big Stock Sale”). As a response, researchers and regulators have been exploring ways to improve Rule 10b5-1. In February 2022, for example, the SEC has released a report discussing various amendments to regulate Rule 10b5-1 plans, some of which have been adopted in December 2022 (see the press release by the SEC). Two major rule changes stand out: mandate disclosure and cooling-off periods for insider trading under Rule 10b5-1. This post explores the implications of these rule amendments, drawing on insights from the recent article “Disclosing and Cooling-Off: An Analysis of Insider Trading Rules,” by Deng, Pan, Yan, and Yang (2024) published in the Journal of Financial Economics.
We live in polarising times. The current political and cultural environment is arguably the most heated and controversial in decades. One of the most prominent victims of our era: the truth. As Mark Twain famously said; “A lie can travel half way around the world while the truth is putting on its shoes.” Political election campaigns, in particular, are riddled with misleading statements, half-truths and outright lies. Our fragmented media ecosystem and the pervasive influence of social media make it easier than ever to distribute falsehoods to a vast audience near-instantaneously, compromising the integrity of political elections.