U.S. SEC to tighten insider trading rules, propose money market fund changes

[December 15, 2021]  By Katanga Johnson

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission (SEC) on Wednesday will propose tightening a legal safe-harbor that allows corporate insiders to trade in the company's shares, and other rules to improve the resilience of money market funds.

The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly/File Photo

The agency will also propose rules to fix problems highlighted by the meltdown of New York-family office Archegos earlier this year.

The slew of long-awaited proposed rules will mark a milestone for SEC chairman Gary Gensler who pledged an ambitious agenda since joining the Wall Street watchdog in April.

The proposed tightening of "10b5-1" corporate trading plans in particular will be cheered by progressives who have long-said the current rules are too loose, allowing insiders to game the system and reap windfalls at the expense of ordinary investors.

The plans currently allow insiders to execute trades in the company's stock on a pre-determined future date, providing legal protection against potential allegations of insider trading on material non-public information.

Critics say, however, it is far too easy to adopt, amend or cancel trades with little scrutiny.

Wednesday's proposal is expected to mandate executives disclose those plans and any modifications, neither of which are uniformly required, according to academics and advocates who pushed for the changes.

Democratic-appointed Commissioner Caroline Crenshaw has also said she supports a so-called "cooling-off period" of at least four-to-six months between the adoption of a Rule 10b5-1 plan and the first trade under the plan.

Wednesday's meeting will also address how to fix systemic risks in the multi-trillion dollar U.S. money market funds, which were bailed out for a second time as investors fled those vehicles during the 2020 pandemic-induced turmoil.

Progressive groups have urged the SEC to improve the resilience of the market, including adjusting the fund's value in line with dealing activity to transfer costs to redeeming investors, known as "swing pricing."

(Reporting by Katanga Johnson in Washington; Editing by Michelle Price and Aurora Ellis)

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