Retirement Plan Insider Trade Rules Due by Month's End

August 7, 2002 ( - Administrative rules governing reporting of insider trading within employer retirement plans that arose from a recent landmark corporate reform bill should be ready when the reporting requirement takes effect August 29.

That was the word from the Securities and Exchange Commission (SEC), as officials also announced that certain other insider trades have to be reported to it on the agency’s so-called Form 4 within two days of the transaction.

The deadline is part of reform legislation largely authored by Senator Paul Sarbanes (D-Maryland) and signed into law by President Bush last week. The new reporting requirement applies to officers, directors, and principal security holders, the SEC said.

The tougher reporting was designed to make it harder for corporate big wigs to deceive shareholders. It comes in the wake of several financial scandals in which officials were accused of improperly dumping blocks of company stock before its value evaporated.

The Sarbanes-Oxley Act of 2002 does not require certain transactions be reported within the two-day time frame, allowing those reports to be filed “at such other time as the commission shall establish, by rule, in any case in which the commission determines that such two-day period is not feasible.”

The exemptions would apply to pre-approved regular stock sale plans, which are set up by officers and directors who are not in possession of material, nonpublic information.

SEC officials said they are reviewing the deadline rules to impose on retirement plan insider transactions as well as other transactions “where objective criteria prevent the insider from controlling (and in many cases from knowing) the timing of the transaction execution” and where the SEC has decided the two-day rule won’t work.

Discretionary trading through employee benefit plans might qualify for more flexible treatment, according to the SEC.