One of the country's biggest managers of pension funds is concerned that corporate insiders might be getting a deal that's a little too good to be true, and has registered a complaint with the Securies and Exchange Commission.
According to the Wall Street Journal, the Council of Institutional Investors – a nonpartisan organization which comprises some $3 trillion in pension investments on behalf of public, private and union pension funds – asked the SEC in late December to consider the improprieties of executives who've profited rather heavily from trading their own stock in advance of big news about bad times for their own companies
The CII's letter, sent Dec. 28, asks interim SEC Chairman Elisse B. Walter to examine the potential misuse of trading plans that allow company insiders to trade their company stock without providing a 30-day notice, especially in cases of major business changes that could considerably raise the values of those shares.
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The CII cites analysis completed by the Journal which found that, out of trades of some 20,000 corporate executives over the last decade, more than 1,400 executives who cashed in their stock just before the release of bad news about their companies ended up making gains of at least 10 percent – while regular stockholders experienced significant losses, as did the pension funds investing in the companies.
In the past, the SEC has considered changing its rules to more thoroughly regulate the timing allowed for insider stock sales – and organizations such as the CII continue to push for regulations requiring as many three months or more of mandatory delays.
The CII would also like the SEC to consider holding corporate boards accountable for the oversight of pre-set trading plans that might provide insiders with similar financial benefits.
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