SEC Law: Basics
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Articles
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Richard Friedman
NEW! An often underappreciated danger that companies face is the risk that an executive or employee may violate corporate, tax, or securities law. This article series outlines practices for executives to help them avoid compliance problems, and explains the possible penalties of noncompliance. Part 1 focuses on compliance issues involving company stock holdings and transactions.
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Insider trading is illegal. It occurs when someone...
Don't confuse restricted securities and restricted stock. They are very different...
Yes. Stock held by an "affiliate" (e.g. any director or executive officer) of a public company generally must be ...
A casualty or theft loss would allow you to deduct the lost amount against your ordinary income, subject to some limits. However, Treasury regulations and court rulings would probably stand in your way. Nevertheless, what you can do is...
The SEC is, in full, the Securities and Exchange Commission. The SEC is the federal agency...
In enforcement actions, the SEC has gone after option or stock profits gained by senior executives at prices that were inflated by financial fraud. Recent legislation, such as the Dodd-Frank Act, makes this type of enforcement action even more likely...
At least for senior executives, you can find useful information. You can either go to the...
Senior executives, directors, and large-block shareholders need to make ongoing filings about their company stock holdings to report any changes. The initial report to be filed by a Section 16 reporting person is Form 3. It must be filed with the SEC within...
"Affiliate" is a term used in the securities laws to refer to a person in a relationship of control with a company. "Control" denotes the power to direct the management or policies of the company in some way, and this is generally means...
This is the most common way to resell restricted securities not registered with the SEC, and the most common way for senior managers and directors to sell their stock. There are five core requirements of a Rule 144 sale, which include...
Blackout periods are times when you are prohibited from trading your company's securities, and window periods are times when you are allowed to trade. Some companies also prohibit...
The popular media sometimes confuse the term "blackout" with "lockdown." For stock plans, these terms apply to different...
During any 401(k) blackout period, directors and executive officers...
When you are the trustee of a grantor-retained annuity trust (GRAT), and the beneficiary during the annuity payment period, the securities law prohibition on insider trading...
As the IRS confirmed in Revenue Ruling 2005-48, the tax-measurement date...
At a minimum, do not expect any new stock option grants with an exercise price lower than the market price on the grant date. The tax treatment varies by type of grant. Some of the companies involved in the controversial backdating of stock options restricted employees from...
Form 144 must be filed on or before the sale date. Form 4 must be filed...
Except at times when a number of affiliates will simultaneously sell a portion of their stock, a public company is unlikely to register an affiliate's stock for resale...
Yes. Section 16(a) of the Securities Exchange Act of 1934 provides that every person who is a director or executive officer (or a 10% beneficial owner) of a public company must file periodic reports of stock ownership with the SEC...
Yes. If you are an officer or director of a public company, your company probably has a pre-clearance policy...
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Insider Trading
Tax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.
Compliance Concerns That Executives Must Understand To Prevent SEC, IRS, And Corporate Problems (Part 1): Company Stock Trades 
