Rule 10b5-1 of the Securities Exchange Act of 1934 provides a safe harbor from insider trading liability for persons who trade securities based on pre-existing plans, provided that those plans do not call for trades based on material, non-public information.
The rule was enacted in 2000 in response to concerns that insiders were using insider information to trade securities for personal gain, and that it was difficult to prove that those trades were made with the intention of violating insider trading laws.
The rule provides that a person will not be liable for insider trading if they can prove that the trade was made pursuant to a plan that was established before the person had any material, non-public information about the company.
The plan must be in writing, and the person must not have modified the plan within the six months prior to the trade.
The rule also requires that the person not be aware of any material, non-public information at the time the plan is established or at the time the trade is made. Can you terminate a 10b5-1 plan? Yes, you can terminate a 10b5-1 plan. However, there are certain conditions that must be met in order to do so. First, you must notify the company that you intend to terminate the plan. Second, you must have a valid reason for terminating the plan. Finally, you must follow the procedures outlined in the 10b5-1 plan. What are the elements of civil cause of action for violation of Rule 10b-5? In order to establish a civil cause of action for violation of Rule 10b-5, the plaintiff must prove the following elements:
1. That the defendant made a material misrepresentation or omission;
2. That the defendant acted with scienter (i.e. with the intention of deceiving or defrauding the investors);
3. That the misrepresentation or omission was made in connection with the purchase or sale of securities;
4. That the plaintiff relied on the misrepresentation or omission;
5. That the plaintiff suffered damages as a result of relying on the misrepresentation or omission.
What damages are available to a plaintiff under section 10 B and Rule 10 b )( 5 of the Securities Exchange Act of 1934?
The Securities Exchange Act of 1934 governs the secondary market for securities in the United States.
There are two types of damages available to a plaintiff under this Act:
1) Actual damages; and
2) Punitive damages.
Actual damages are those which are incurred as a direct result of the defendant's actions, and are meant to compensate the plaintiff for his or her losses.
Punitive damages, on the other hand, are not meant to compensate the plaintiff, but rather to punish the defendant and deter future similar conduct.
In order to recover punitive damages, the plaintiff must show that the defendant's actions were willful or reckless.
What is a 10b-5 opinion? A 10b-5 opinion is an opinion issued by the SEC that allows for the enforcement of securities laws. The opinion is based on the belief that there is a relationship between investors and securities, and that this relationship gives rise to a duty on the part of the issuer to disclose material information.
Who can be liable under 10b-5? There are four main categories of individuals who can be held liable under Rule 10b-5 of the Securities Exchange Act of 1934:
1) Individuals who make material misrepresentations or omissions in connection with the purchase or sale of securities;
2) Individuals who engage in insider trading;
3) Individuals who engage in manipulative or deceptive practices in connection with the purchase or sale of securities; and
4) Individuals who participate in a scheme to defraud investors.
Each of these categories will be discussed in turn.
1) Individuals who make material misrepresentations or omissions in connection with the purchase or sale of securities can be held liable under Rule 10b-5. This includes making false or misleading statements about a security, or omitting material information that would be necessary to make the statements made not misleading. For example, if an individual sells securities by telling potential investors that the securities are backed by the full faith and credit of the United States when they are not, the individual could be held liable under Rule 10b-5.
2) Individuals who engage in insider trading can be held liable under Rule 10b-5. Insider trading is generally defined as trading on the basis of material, non-public information. For example, if an individual learns that a company is about to be acquired and buys shares of that company on the basis of that information, the individual could be held liable under Rule 10b-5.
3) Individuals who engage in manipulative or deceptive practices in connection with the purchase or sale of securities can be held liable under Rule 10b-5. This includes practices like price manipulation, wash sales, and spoofing. For example, if an individual buys and sells the same security in a short period of time in order to artificially manipulate the price of the security, the individual could be held liable under Rule 10b-5.
4) Individuals who participate in