Corporate board members are increasingly using a type of opaque trading plan that was originally intended primarily for executives.
- The use of government-sanctioned 10b5-1 trading plans, designed to avoid insider trading suspicion by scheduling trades in advance, has surged by 55% among nonexecutive directors since 2008. Some directors use these plans for rapid large-scale stock sales.
- Critics argue that these trading plans may sometimes be abused, especially by board members who also run investment funds, potentially leading to the appearance of impropriety.
- Legal authorities and compliance officers are becoming increasingly vigilant regarding the potential misuse of these plans by corporate insiders, emphasizing the importance of transparent and proper enforcement.
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