The U.S. Securities and Exchange Commission (SEC) on Wednesday proposed tightening a legal safe-harbor that allows corporate insiders to trade in a company’s shares, and other rules to improve the resilience of money market funds.
The agency also unveiled measures to increase transparency around share buybacks and the complex derivatives at the center of New York-based Archegos Capital Management’s meltdown earlier this year.
The slew of long-awaited changes mark a milestone for SEC Chair Gary Gensler who has outlined an ambitious agenda to crack down on corporate wrongdoing, improve corporate governance and address inequities in the markets.
The changes, which are subject to public consultation, will affect a swathe of corporate America, from publicly traded companies and their top executives, to banking groups and asset managers including BlackRock, Vanguard, Fidelity and Goldman Sachs.
The proposed tightening of “10b5-1” corporate trading plans in particular was pushed by progressives who have long criticized the rules, saying they allow insiders to game the system and reap windfalls at the expense of ordinary investors.
The plans allow insiders to trade in a company’s stock on a pre-determined date, providing legal protection against potential allegations of insider trading. Critics say it is far too easy to adopt, amend or cancel trades with little scrutiny.
Wednesday’s proposal requires executives to disclose those plans and any modifications. For executives, the SEC also wants a “cooling-off” period of 120 days between the adoption of a plan and the first trade. For companies trading in their own securities, the cooling-off period would be 30 days.
The proposal would also bar insiders from having several overlapping plans, which Gensler said could allow them to cherry-pick favorable plans as they please.
While critics have long said the plans are flawed, trades by executives at Pfizer and Moderna during the COVID-19 vaccine development process renewed scrutiny of such plans and highlighted transparency issues, said Daniel Taylor a professor with expertise on issues related to financial disclosures at the University of Pennsylvania’s Wharton School.
“There is mounting evidence that these plans are, at best, being used in a manner in which they were not intended, and at worst, being abused to enrich corporate insiders,” Taylor said.
The SEC also said it wants companies to disclose share buybacks one business day after execution, in contrast to the current quarterly disclosure rule.
Investor groups welcomed the changes.
“Cleaning up practices that can be a pathway for abusive trades will help restore trust in our markets,” said Amy Borrus, head of the Council for Institutional Investors.
The SEC also detailed changes to address systemic risks in the $5 trillion U.S. money market fund sector, which was bailed out for a second time during the 2020 pandemic-induced turmoil.
Critics say the sector enjoys an implicit government guarantee.
SEC proposed new liquidity requirements, scrapping redemption fees and restrictions, and adjusting funds’ value in line with dealing activity, a process known as “swing pricing.”
While the funds industry has conceded changes are necessary, corporate groups may oppose some of the trading disclosures.
“Some of this appears to be overkill,” said Howard Berkenblit, partner at law firm Sullivan and Worcester. “A long cooling-off period and limits on the number of plans will be less popular and could cause a decrease in use of these plans.”
The SEC also outlined a plan to stamp out misconduct via security-based swaps.
Such derivatives were at the center of the Archegos meltdown, which left Wall Street banks on the other side of the family office’s trades with $10 billion in losses.
Under the new rule, investors will have to publicly disclose such trades.
(Reporting by Katanga Johnson in Washington; Editing by Michelle Price, Nick Zieminski, Cynthia Osterman and Leslie Adler)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
