Finance, US News, Wall Street

SEC Imposes Tighter Rules On Insider Trading, Buybacks

SEC Imposes Tighter Rules On Insider Trading, Buybacks

Sen. Elizabeth Warren may have failed when it comes to installing her preferred candidate to lead the Federal Reserve, it looks like Warren is being offered another feather in her cap (so to speak), even if her arch-nemesis Jerome Powell was in fact nominated for Fed chief.

Because as WSJ reports, Wall Street’s primarily regulator is putting forward slightly tighter rules on how and when corporate insiders – and presumably Fed officials – can sell their companies’ stocks.

This has become an increasingly obvious issue lately as corporate titans have been dumping shares at the same time as the firms are buying back record amounts of their own stock.

The SEC, meeting on Wednesday, plans to propose new restrictions on executive stock trading and greater disclosure requirements around company share buybacks. Despite reports of infighting between Democrats and Republicans on the committee, the five commissioners are set to vote on the proposal, along with three others. If most members support the changes, the agency will put the proposed rules out for public comment before voting to finalize them next year.

One of the rules under consideration is tightening disclosure rules for swap-based assets, to try and ensure that a family office the size of Archegos can’t suddenly lose all of its money in a handful of overleveraged (and some might say bizarre) portfolio assets.

The new rules the agency is set to outline Wednesday would require more disclosures and place additional restrictions on firms that trade these derivatives. Positions worth at least $300MM, or the equivalent of 5% of the shares trading in an underlying security, would trigger new SEC reporting requirements. Investors would have to disclose their identities, positions in the swaps and underlying securities, as well as related loans, according to the SEC. The agency would also require reporting for large positions involving bonds and credit default swaps.

Put another way: money launderers and ‘family office’ investors trying to keep a low profile are about to have a more difficult time of it.

Finally, companies would also have to disclose more information about their insider-trading policies and their practices around option grants that are timed within 14 days of a significant news release.

Tyler Durden
Wed, 12/15/2021 – 11:28

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