0

From what I understand if a CEO sells stock in their company and the stock price then goes down significantly within less than a year, they can get indicted for "insider trading" and face 5 to 10 years in jail.

Does this basically mean that a CEO basically has to hold onto stock indefinitely and only sell when they are sure the company is not facing a decline? So, basically sell and pray the company does not tank?

2

Insiders, such as a CEO, are allowed set up predetermined trading plans to avoid accusations of insider trading:

Rule 10b5-1 is established by the Securities Exchange Commission (SEC) to allow insiders of publicly traded corporations to set up a trading plan for selling stocks they own. Rule 10b5-1 allows major holders to sell a predetermined number of shares at a predetermined time. Many corporate executives use 10b5-1 plans to avoid accusations of insider trading.


See also:

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.