SEC Stops Executives From Quietly Selling Stock

The days of top executives dumping their company stock to protect their own wealth — while encouraging stockholders to keep investing — appear to be over. Beginning June 30, corporate insiders have two days to electronically report their transactions to the Securities and Exchange Commission Web site and to post the actions on their company Web site.

This replaces the old paper reporting system, which required regulators and the media to dig through mountains of paper at SEC headquarters to uncover fraudulent transactions. The old system also gave individuals up to 40 days to report their company-related stock transactions. Corporations themselves have been required to file their transactions electronically for some time.

The new regulation, mandated by Congress last summer and adopted by the SEC on April 24, is part of the cleanup campaign begun after it was learned that Enron officers disposed of hundreds of millions of dollars of company stock in 2000 and 2001 while continuing to encourage investors — including their own employees — to continue buying stock in what top officers knew was a sinking ship.

"This is going to help investors see if corporate executives are making rosy statements about the company while at the same time unloading the stock," SEC commissioner Cynthia Glassman said before the vote on the new rules, which allow investors to keep a better eye on the companies in which they hold stock. They can monitor their holdings through the SEC Web site as well as the Web sites of each company.

The SEC’s five commissioners also approved on April 24 new rules that prohibit company officers from pressuring or misleading auditors to falsify statements about a company’s financial position. This rule also stems from last summer’s legislation.

You may like these other stories...

A proposal issued by the Governmental Accounting Standards Board (GASB) last week explains how fair value measurement should be defined for state and local government financial reporting.The exposure draft, Fair Value...
By Jason Bramwell The board of trustees of the Financial Accounting Foundation (FAF) finalized a new policy on November 19 that provides the Governmental Accounting Standards Board (GASB) with direction on what...
By Jason Bramwell The Governmental Accounting Standards Board (GASB) is now offering a free online toolkit designed to assist preparers and auditors of state and local government pension plans with implementing new...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.