This is why we do not believe insiders should be allowed to transfer or sell any stock until 3-5 years after leaving the company. Even scheduled sales do not solve the problem of insider information because the executives control the timing of key announcements.
When Abbott Laboratories chief Miles White cashed out $32 million of stock and options in 2019, shareholders had reason to shrug it off. Online regulatory filings said the sales were part of a “previously adopted plan” — a sign they weren’t based on any current inside information.
It turns out, the disposals that Monday had been set up the previous Friday. To learn that detail, investors would have to track down the plan he filed with the Securities and Exchange Commission by traveling to the agency’s headquarters in Washington, clearing security and digging into a filing cabinet.
A growing body of academic research shows an arcane government program that’s supposed to help senior executives buy and sell shares properly and avoid unnecessary scrutiny is rife with well-timed transactions. As SEC Chair Gary Gensler put it last week, the agency’s loose rules have led to “real cracks” in its surveillance of potential insider trading.
It boils down to this: The SEC requires executives to set up trades in advance, ideally creating a “cooling-off period” so that any insider information they have can go stale before transactions are carried out. But there’s no rule that executives must wait once plans are established, and some execute transactions within days or weeks.
What’s more, short-term trading plans can be hard to scrutinize because they’re filed on paper, which the SEC has stored in ways that make it hard for the public and its own surveillance systems to access.Corporate Bosses Make Well-Timed Stock Sales in SEC ‘Blind Spot’ – Bloomberg