The SEC wants to crack down on corporate insiders' big stock sales
prosen@insider.com (Phil Rosen) 

Securities and Exchange Commission Chair Gary Gensler. 

Evan Vucci/Associated Press

The SEC unanimously proposed an amendment to insider-trading rules that cover so-called 10b5-1 plans.

The new rules are meant to bring more transparency to the market and crack down on insider-trading abuses.

Sen. Elizabeth Warren and others have long been vocal in calling out the SEC to make changes to 10b5-1 plans.

The Securities and Exchange Commission proposed changes to insider-trading regulations that would limit how corporate executives — who are often privy to non-public information — can sell shares of their own companies.

Currently, executives are allowed to schedule stock sales days ahead of their actual execution, under so-called 10b5-1 plans. When they were conceived two decades ago, the plans were supposed to allow execs to sell stock without being accused of insider trading.

Morgan Stanley data showed that insiders at more than half of S&P 500 companies have enacted 10b5-1 plans, and doing so has grown increasingly popular. But critics say the plans have been abused, allowing insiders to dump shares ahead of big company moves or announcements. In addition, there's no requirement for executives to disclose they have such plans.

Sen. Elizabeth Warren and others have called on the SEC to overhaul 10b5-1 plans, claiming corporate chiefs can bag profits with privileged knowledge that everyday retail traders don't have, and that it undermines public confidence in the market.

SEC Chair Gary Gensler acknowledged the problems in a press release Wednesday. "Over the past two decades, we've heard concerns about and seen gaps in Rule 10b5-1 — gaps that today's proposal would help fill."

Under the amendments to Rule 10b5-1 that the SEC unanimously proposed, company insiders would have to wait about four months between scheduling a trade and shedding their stock.

The proposed amendments also would prohibit overlapping trading plans and limit single-trade plans to one per year. Additionally, executives would be required to attest that they were not aware of any non-public information when they made plans for trades.

The SEC will now seek public comment before finalizing its proposals.