Who is subject to short-swing profit rule?

This rule applies to any shareholder, officer, or director who owns more than 10% of a class of the company’s equity securities registered under the Securities Exchange Act.

Are short-swing profits illegal?

Section 16(b) of the Exchange Act is meant to stop insider trading by those most likely to have important corporate information. Except in limited circumstances, the Act prohibits “short-swing profits” (profits gained in less than six months) by corporate insiders in their own company’s stock.

How do you calculate short-swing profit?

1. Take the # of shares bought for the lowest purchase price – Transaction 1.
2. Take the # of Shares sold for the highest sale price – Transaction 2.
3. Take the difference in Price of Shares (purchase/sale) for the days of Transaction 1 & 2.

What are short-swing profits?

“Short-swing profits” are profits made on matching purchases and sales of the issuer’s equity securities within a six-month period.

When is short swing profit exempt from Section 16?

A. Certain transactions may be exempt from Short Swing Profit liability under Section 16. These include: When discretionary trading transactions if the transfer or distribution election is made at least six months after the time of Hamilton & Associates Law Group, P.A. All Rights Reserved

Are there exceptions to the short swing rule?

Exceptions to the short-swing profit rule have been cited in court. In 2013, the U.S. Second Court of Appeals ruled in the case of Gibbons v. Malone that this regulation did not apply to the purchase and sale of shares within a company by an insider as long as the securities were of different series.

Which is public companies subject to the short swing profit rules?

A. Section 16 imposes restrictions (known as “Short Swing Profit Rules”) on purchase and sale transactions by corporate “Insiders” of certain publicly traded companies. Q. Which public companies are subject to the Short Swing Profit Rules?

When to use nonexempt to recover short swing profit?

As nonexempt transactions, the insiders’ acquisition of common stock in the conversion could be matched with their sales of common stock less than six months later, and the newly public company would have a right to recover the insiders’ short-swing profit.