Large, seemingly well-timed stock sales by executives at Pfizer, Moderna and others have garnered significant attention. The companies quickly defended their executives by pointing out that many of these stock sales were preplanned, according to a “10b5-1 plan.” In theory, these plans allow insiders who are not in possession of material non-public information to commit to a series of trades well in advance of market-moving events and provide “safe harbor” against violations of securities laws. If used as intended, these plans provide corporate insiders with a tool to trade their shares and obtain liquidity without raising legal concerns. But like any tool, these plans can be misused. Our research shows that the recent examples are the tip of the iceberg.

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Current rules still allow executives to time their share sales to maximize gains.  Caroline Crenshaw, SEC Commissioner, and Daniel Taylor, Associate Professor of Account at The Wharton School see a “cooling off period” as one solution.

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Co-authored with a dozen law faculty authoring in support. Discusses how an individual can use FIFO methods and modern computing technology to trace the flow of securities using bluesheet and CAT feeds

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Co-authored with six other law faculty authoring in support. Discusses how management engineered short squeezes can be considered a form of market manipulation.

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Lead author; 30 academics authoring in support. Discusses valuation and compensation issues surrounding SPACs.

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Lead co-author. Discusses how executives’ knowledge of pre-arranged stock sales during the class period can influence their decision-making, even though the sales themselves were arranged prior to the class period.

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We ask that the SEC amend Rule 144 in light of changes in securities-offering practices and the Supreme Court’s consideration of Slack v. Pirani, addressing Section 11 liability in direct listings. Specifically, the Commission should amend Rule 144 such that, upon the effectiveness of a registration statement, holding periods are reset to the later of: (1) 90 days or (2) the next 10-Q or 10-K.

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We ask that the Commission develop rules to require public companies to disclose sufficient information to allow investors to assess the extent to which firms invest in their workforce.

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We support the Commission’s proposal to modernize Form 144. Under the current rule, 99.3% of Form 144s are filed on paper every year (over 700,000 from 2001 to 2020). The Commission’s current practice is to retain hard copies of these paper filings for 90 days in the Commission’s Public Reading Room in Washington DC and not post them on EDGAR (see Exhibit 1 for an example of a Form 144). This arcane practice would be of little consequence if the information contained in Form 144s was of no interest to investors; on the contrary, the demand for information on these Form 144s is sufficiently high that data providers regularly visit the Reading Room to scan, digitize, and disseminate Form 144s to corporate clients. As a result, data on over 700,000 Form 144s is available from third-party data providers (e.g., The Washington Service and Thomson/Refinitiv) but not EDGAR. In effect, the Commission has created a two-tiered disclosure system that makes “public disclosure” accessible to large institutional clients, but inaccessible to individual investors. The Proposal would end this practice by mandating Form 144 be filed electronically on EDGAR.

Paper filings do not protect investors, do not promote efficient and fair markets, and do not promote capital formation. Electronic reporting does all three––it ensures the public, capital providers, and the Commission have timely access to information about officers’ and directors’ transactions and data on their associated 10B5-1 plans.

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We provide analysis and comments with the intent of helping the SEC identify issuers that have filed an annual report containing an audit report by a public accounting firm that is located in a foreign jurisdiction where the PCAOB is unable to inspect or investigate the audit. We identify 226 issuers that meet the non-inspection criteria as defined within the HFCA Act, and an addition 44 issuers with unique situations that may require additional guidance from the SEC. These issuers have a combined market cap. in excess of $2 trillion. We also analyze and discuss current issuer disclosures relating to the inability of the PCAOB to inspect the issuer’s audits, and find that issuers are generally not providing the detailed disclosures necessary to comply with the HFCA Act.

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We comment on the Securities and Exchange Commission’s (the “Commission”) proposed Amendments to the Accelerated Filer and Large Accelerated Filer Definitions. We provide comments and analysis relating primarily to the Request for Comments in Sections II.E and III.D of the proposed Amendments (“Proposal”). Our comments relate to the provisions of the Proposal that would eliminate internal control audits required under Section 404(b) of the Sarbanes-Oxley Act for companies with annual revenue less than $100 million. Part I provides comment on the central premise of the Proposal. Part II provides comments on various aspects of the Commission’s economic analysis. Although it might be socially desirable to encourage investment, and research and development, we believe there are ways to do so without sacrificing oversight.

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We comment on the SEC’s Proposed Reporting Threshold for Institutional Investment Managers (“Proposal”). We estimate the cost savings from the Proposal are economically small, and amount to 0.004% (0.008%) of assets under management for the average (median) affected filer, and 0.02% of assets for the smallest filer. This small cost savings needs to be weighed against the potentially large costs to investors and others created by eliminating a public disclosure that they heavily use. We analyze the usage patterns of the EDGAR system, and specifically the frequency of Form 13F downloads from EDGAR. Our analysis suggests the investing public and other stakeholders are strongly interested in the information in Form 13F filings, particularly those of affected filers, and that exempting such institutions from filing Form 13F would deprive the market of useful information.

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