Theme: Insider Trading After the 2022 Rule 10b5-1 Amendment

Speaker: Associate Professor Seil Kim, Baruch College, City University of New York

Host: Professor Jing Dai, School of Accounting, Southwestern University of Finance and Economics

Time: 10:00 a.m.-11:30 a.m., September 30, 2025, Tuesday

Place: Room 650, Chengzheng Building, Liulin Campus

Sponsor: Academic Research Office, School of Accounting

Introduction of the speaker: 

Research Team on Theoretical Innovation and Methodology System of Finance and Accounting with Chinese Characteristics for the New Era, Research Team on Major Basic Theories and Practical Innovation of Digital Economy, School of Accounting, Office of Academic Research.

Seil Kim earned his PhD in Accounting from New York University. He is currently an Associate Professor of Accounting at Baruch College, the City University of New York. Professor Kim’s research has been published in leading international journals including The Accounting Review (TAR), Management Science (MS), Review of Accounting Studies (RAST), and Contemporary Accounting Research (CAR). His research interests cover insider trading, corporate governance, credit risk, and related areas.

Abstract:

The lecture focuses that investigate the impact of the controversial 2022 amendment to Rule 10b5-1, which imposed a cooling-off period and restricted overlapping and single-trade plans on prearranged insider transactions. The amendment led insiders to (i) execute stock sales under 10b5-1 plans with longer cooling-off periods; (ii) curtail opportunistic sales under 10b5-1 plans prior to stock price drops or earnings misses; (iii) limit the backdating of stock gifts; and (iv) decrease the granting of options around material information events. Further evidence suggests a reduction in opportunistic 10b5-1 trades rather than a migration toward non-10b5-1 sales. However, we find that firms more affected by the rule amendment experience lower price efficiency after the amendment, implying a potential cost of restricting the flow of information through insider trading. In addition, terminations of 10b5-1 plans are associated with positive subsequent stock returns, suggesting that insiders avoid selling when they expect favorable news. Overall, our findings indicate that while the amendment substantially curtailed the opportunistic use of 10b5-1 plans, it increased the costs of 10b5-1 plans and lowered stock price efficiency.