Short Swing Profit Rule

Section 16 insider reporting and liability for short swing trading a public company with a class of securities registered under section 12 or which is subject to section 15 d of the securities exchange act of 1934 as amended exchange act must file reports with the sec reporting requirements.

Short swing profit rule. Officers directors and 10 holders are considered insiders for purposes of section 16. Short swing profit rules under the exchange act. What do the short swing profit rules of section 16 prohibit. Public company from profiting from any purchase or sale or sale and purchase of the company s equity securities within a period of less than six months.

A short swing rule restricts officers and insiders of a company from making short term profits at the expense of the firm. Section 16 imposes a strict liability standard good faith mistakes or misunderstandings of the law are not defenses. The so called short swing profit rule under securities exchange act section 16 b generally prohibits officers and directors as well as 10 percent shareholders of a u s. The company cannot waive its right to recover the short swing profits and any stockholder of the company can bring suit in the name of the company to recover short swing profits on behalf of the company.

Final section 16 rules are user friendly. Section 16 prohibits short swing transactions. Posted by brenda hamilton securities and going public lawyer. The rule mandates that if an officer director or any shareholder holding more than 10 of outstanding shares of a publicly traded.

The short swing profit rules were created to prevent insiders who have greater access to material company information from taking advantage of information for the purpose of making short term profits from trading an issuer s securities. Short swing transactions are the sale and purchase of a public company s.