Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, April 4, 2007

Rule 10b5-1 Plans and Nacchio Trial

Rule 10b5-1 plans may replace backdating stock options as the next big scandal.  The insider trading trial of Joseph Nacchio, former Qwest CEO, may focus on allegations that he had inside information when he made advance plans to sell his shares in 2005.  An academic study provides evidence that some insiders entered Rule 10b5-1 plans before a drop in the market prices of theier company's shares.  Rule 10b5-1 plans are common among executives and allow them to trade in their shares provided they are done under a prearranged plan made when they had no inside information.  Linda Chatman Thomsen, head of SEC Enforcement, recently announced that the agency was looking hard at these plans.  See WSJ, SEC Now Takes a Hard Look At Insiders' 'Regular' Sales.  For other news on the Nacchio trial, see NYTimes, Qwest’s Ex-President Can’t Recall Remarks on Finances.

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