A good 10b5-1 should allow trades to be executed on your behalf even while you might hold non-public information. Useful for cash flow, so you can buy nice things.
But if you control the date of the announcement to line up with instructions in your 10b5-1 plan, that would probably look more like insider trading despite the plan.
Which is how legal insider trading for management works these days. Because cancelling a 10b5-1 is perfectly legal at any time.
So you could totally abuse the system by submitting 5 of them, designed to allow for different strategies, then cancelling some of them to pick specific trading strategies based on more recent insider info.
And this works: cancelling them is normal, so that won't even attract much attention. It's a matter of executing well on this loophole.
The exact dates are not necessarily set in advance in a Rule 10b5-1 plan. The broker can make the decision based on metrics specified in the plan.
I'm guessing that the sharp stock price rise caused by the announcement triggered the sale based on these predetermined metrics, as it was meant to be.
That is to say, this is a non story and the article only tries to whip up controversy where there is none.
You're right. Anyway, even if it was completely discretionary selling after the announcement wouldn't be insider trading (unless he knows something bad which hasn't been disclosed yet that will make the price go down later). But the intention to sell, however is triggered, gives an incentive to put a positive spin on the announcement and profit from it (hardly unique to this case, the price of the stock didn't move that much anyway).
It is part of the CEO's job to put positive spins on things and to boost the stock price.
All CEOs are given stock-based compensation and incentives, and virtually all of them setup these sale plans in order to be able to sell legally and above board.
If you, as a CEO looking ot maximise personal profit, know a sale order data is coming up then you postpone or bring forwards the announcement to maximise the potential for that sale.
I don't know. It would be news if they found out he had actually BOUGHT stocks or stock options just before the announcements, because that would be a clear case of insider trading.
But selling AFTER an announcement when the stocks are up is... what any shareholder would do and would be allowed to do.
I bought Pfizer stock yesterday, I guess it will likely drop today as it looks like the CEO could have planned for the sale at what he perceived would be the peak. True or not a lot of investors will believe it, the optics are very poor.
Well in a country with moral standard above the average, similar amoral yet technically legal behavior is frowned upon and can easily end political careers, as former chief of Swiss central bank found out [1]
That was something else, his wife mysteriously knew that the swiss national bank binds the swiss frank to the euro..and he was the president of the national-bank.
That is insider trading, and directly profiting/stealing from the capital that belongs to the swiss peoples.
He was perfectly allowed to do that by his work contract (and so his wife, since in swiss marriage wealth is shared, and so are taxes here). That argument didn't work well in face of public and he was let go very quickly.
>Hildebrand’s wife Kashya, a former hedge fund trader who now runs a Zurich art gallery, bought 400,000 Swiss francs ($418,000) worth of dollars on August 15, three weeks before her husband oversaw steps to cap the rise of the safe-haven franc. She later sold the dollars at a higher rate.
AND
>Hildebrand admitted the scandal had revealed shortcomings in the SNB’s internal regulations and code of conduct.
So he self knew that it's not right to do that, he's not a normal President but the one from the Swiss national Bank. No one wants someone like that in such a position.
AND
>Christoph Darbellay, the Christian Democrat chairman of parliament’s economic committee that Hildebrand addressed, said it would push the SNB to tighten its rules.
“People who can have an influence on the currency should keep their hands off,” he said.
Many things are (still) legal. This is how regulations form..
Maybe there should be a new regulation:
No major announcements may be made which directly impacts stock price X% before X months of the predetermined sales date.
There is no way to know what percentage an announcement will move a stock. Additionally, given that executives schedule stock sales all year long (most of their comp is stock), that effectively means no announcements can ever be made.
There are rules like that. For example executives cannot buy/sell stocks of their companies around the major announcements like financial results. Most of the time internal compliance department just sets a windows in which it is safe to do such transactions.
As for the announcements one usually has to announce before the transaction is made (again compliance reasons) but then you don’t want to wait because the price tends to move against you with such announcements. This is why the real trades were likely executed just seconds after the announcement.
No, even better would be to trigger a revaluation of all stock values on that date, and tax the income (as normal income, not capital gains) as if 100% of their stock was sold at that price.
So if you hold 100 million shares valued at 1 USD/share, and sell 1 million at 2 USD/share, your tax liability will be assumed on you selling 100 million shares at 2 USD/share (or 200 million of regular income).
But in that case, should Pfizer wait an additional x amount of days before they announce the vaccine just because the CEO had a sell order planned? That wouldn’t be great for the world either I think. Or how did you mean?
It did not occur to me until now that instead of timing their sales to announcements, senior execs could time announcements to their scheduled stock sales. Brilliant, in a way - a legal form of insider trading. In the meantime the lowly peons are often subject to "trading windows", and have no control over any material announcements. A bit of a disadvantage.
You can time announcements to make the price go up before you sell or go down after you did.