Trading Plans and the Insider Trading Defense

What this video covers

• Why the test for trading on the basis of material nonpublic information (MNPI) is awareness, not use, and how the duty can run to the issuer, shareholders, or the source of the information
• The three arrangements that can support an affirmative defense: a binding contract, an instruction to another person, or a written trading plan adopted before awareness of MNPI
• The three ways an arrangement can specify the amount, price, and date, including fixed terms, a written formula or algorithm, or no subsequent influence over trading decisions
• Why a trade must occur pursuant to the arrangement, and how a hedge, deviation, or change to the amount, price, or timing terminates the old plan
• The difference between a plan modification and a broker substitution that keeps identical trading instructions
• The five additional conditions involving good faith, cooling-off periods, director or officer representation, overlapping arrangements, and repeated single-trade plans
• How the 30-day, 90-day, two-business-day, and 120-day cooling-off rules apply, plus the two requirements for an entity defense