Institute Comments on SEC Selective Disclosure and Insider Trading ProposalsWashington, DC, April 27, 2000 - The Institute filed a comment letter on the SEC's proposed rules under the Securities Exchange Act of 1934 regarding selective disclosure and certain aspects of the law of insider trading. The Commission's proposal addresses three issues: - selective disclosure by issuers of material nonpublic information (Proposed Regulation FD (Fair Disclosure));
- whether insider trading liability depends on a trader's "use" or "knowing possession" of material nonpublic information (Proposed Rule 10b5-1); and
- when the breach of a family or other non-business relationship may give rise to liability under the misappropriation theory of insider trading (Proposed Rule 10b5-2).
The comment letter supports the objectives of the Commission's proposed new rules, which are to promote the full and fair disclosure of information by issuers, and to clarify and enhance existing prohibitions against insider trading. However, the letter expresses concern that the proposed rules could produce unintended marketplace consequences. The letter therefore recommends that the proposed rules be modified in certain respects to avoid such consequences while remaining consistent with the Commission's stated objectives.
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