What is Section 10b of the Exchange Act?

What is Section 10b of the Exchange Act?

Section 10(b) of the Securities Exchange Act of 1934 (as amended) (Exchange Act), which prohibits fraud in the purchase or sale of securities (15 U.S.C. § 78j(b)). Securities and Exchange Commission (SEC) Rule 10b-5, which contains the general, catch-all, anti-fraud provision of the federal securities laws (17 C.F.R.

Who does Rule 10b-5 apply to?

Rule 10b-5 covers instances of insider trading, wherein an insider or executive uses nonpublic information to influence share prices to their benefit: Employment of Manipulative and Deceptive Practices.

Which SEC rule provides clarification on what constitutes trading on the basis of material non public information?

Rule 10b5-1 addresses the issue of when insider trading liability arises in connection with a trader’s “use” or “knowing possession” of material nonpublic information.

What is considered material nonpublic information?

Material nonpublic information refers to corporate news or information that has not yet been made public and which could also have an impact on its share price. It is illegal to use this kind of information for one’s advantage in trading stocks or other securities.

Does 10b-5 require intent?

In any private action or enforcement proceeding based on SEC Rule 10b-5 the plaintiff, including the Securities and Exchange Commission, must prove that the defendant engaged in deception or manipulation with scienter, that is, an intent to deceive, which lower courts have held encompasses reckless conduct.

What is a 10b5 opinion?

A letter of counsel, sometimes referred to as a due diligence opinion, generally based upon an investigation of specified facts and addressing the accuracy and completeness of the official statement.

What is a 10 b51 plan?

What Is Rule 10b5-1? Rule 10b5-1, established by the Securities and Exchange Commission (SEC) in 2000, allows insiders of publicly-traded corporations to set up a trading plan for selling stocks they own. Rule 10b5-1 permits major holders to sell a predetermined number of shares at a predetermined time.

What is 10b-5 letter?

A Rule 10b-5 disclosure letter is a letter from lawyers confirming that they have undertaken certain due diligence procedures and that, on the basis of such procedures, have no reason to believe that an offering document contains an untrue statement of material fact or omits to state a material fact necessary in order …

What are the consequences of insider trading?

Criminal Penalties: The maximum sentence for an insider trading violation is 20 years in a federal penitentiary. The maximum criminal fine for individuals is $5,000,000, and the maximum fine for “non-natural” persons (such as an entity whose securities are publicly traded) is $25,000,000.

What is Rule 10b-5 of the SEC Act?

Rule 10b-5 is the Securities and Exchange Commission’s (SEC) main basis for investigating possible security fraud claims. Violations of the rule include executives making false statements in order…

What is the history of rule 10b-10?

On April 18, 1983, the Securities and Exchange Commission issued Release No. 34-19687 announcing the adoption of changes to Rule 10b-10 under the Securities Exchange Act of 1934 (17 CFR 240 lOb-10), the “securities confirmation rule,” (the “Rule”).

What is rule 10b-10 confirmation?

Rule 10b-10 requires broker-dealers to send customers a written confirmation on or before the completion of a transaction. It also prescribes the type of information required to be displayed on securities confirmations. This information varies with the circumstances of the transaction and the type of security.

What is Section 10(b) of the Securities Exchange Act?

Section 10 (b) of the Securities Exchange Act of 1934 (Exchange Act) and the associated Rule 10b‐5 prohibit the employment of manipulative and deceptive devices in the trading of securities.