The Legality of Opportunistically Timing of Public Company Disclosures in the Context of SEC Rule 10b5-1

39 Pages Posted: 19 Feb 2016 Last revised: 8 Oct 2016

Date Written: February 18, 2016


Commentators have discovered that executives who engage in securities transactions purportedly under the shield of a Rule 10b5-1 Plan, so that their trades do not constitute unlawful insider trading, achieve abnormal returns. There is speculation that these returns may be achieved by influencing the timing of corporate disclosures, so that, for example, bad news is withheld at the corporate level until after a Plan sale occurs.

This Article concludes that so long as this delay in disclosure does not violate an SEC mandated disclosure requirement, Rule 10b-5 is not violated, nor could the SEC expand Rule 10b-5 to reach disclosure timing of this type. The Article also addresses the application of the common law to disclosure timing. The use of corporate information to time corporate disclosure for a personal benefit, to achieve a more favorable outcome in personal securities trading pursuant to a Plan, may be a breach of duty under the corporate common law of some states, including Delaware, applying established principles of the common law of insider trading. It is unlikely, if not impossible, however, that state regulatory authorities could or would pursue such conduct.

If remedial action is needed to discourage, and effectively preclude, disclosure timing, it should be in the nature of SEC mandated disclosures of information regarding Rule 10b5-1 Plans, something the SEC proposed more than ten years ago and then abandoned without explanation, and the exclusion of those who engage in disclosure timing from the benefits of Rule 10b5-1 by amending that rule itself.

Keywords: section 10(b), rule 10b-5, rule 10b5-1

JEL Classification: K10, K30

Suggested Citation

Horwich, Allan, The Legality of Opportunistically Timing of Public Company Disclosures in the Context of SEC Rule 10b5-1 (February 18, 2016). 17 Business Lawyer 1113 (2016), Northwestern Law & Econ Research Paper No. 16-01, Available at SSRN: or

Allan Horwich (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

ArentFox Schiff ( email )

233 S. Wacker Drive
Suite 7100
Chicago, IL 60606-6473
United States

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