Undoing a Deal with the Devil: Some Challenges for Congress's Proposed Reform of Insider Trading Plans

The adoption of Rule 10b5-1 was, in a manner of speaking, a deal with the devil that the SEC and some lawmakers now appear to regret having made. The problem is that, as is often the case with such a deal, it cannot be easily undone. I identify challenges presented by the restrictions on Trading Plan use that Congress has proposed in the Corporate Insiders Act. In light of these challenges, I argue that effective Trading Plan reform cannot be accomplished by simply restricting the use of Trading Plans while leaving Rule 10b5-1(b)'s awareness test in place. If there is to be reform, it should be comprehensive. If neither the SEC nor Congress desires comprehensive reform of our current insider trading regime, however, I conclude by offering the consolation that permitting insiders to continue to use Trading Plans strategically may not be so bad after all. Perhaps even a deal with the devil can be worked for the good of investors.