Rule 10b5-1

## What does Rule 10b5-1 allow insiders to do? - [x] Sell predetermined shares without insider trading issues - [ ] Issue shares based on last week’s gossip - [ ] Predict the weather for investment decisions - [ ] Sell shares at surprise party events > **Explanation:** Rule 10b5-1 allows corporate insiders to plan pre-established sales of shares, steering clear of insider trading hot waters! ## Who needs to ensure that no MNPI is involved when using Rule 10b5-1? - [ ] Your dog - [ ] The shopping mall security guard - [x] Company executives and brokers involved in the transaction - [ ] Random strangers in the stock market > **Explanation:** Both company insiders and brokers must not possess any MNPI at the time of the sales to comply with this regulation. ## When must a 10b5-1 plan be established? - [x] Before accessing any material nonpublic information - [ ] On the day of stock price evaluation - [ ] While holding a customer appreciation party - [ ] Whenever feeling tired of the current stock price > **Explanation:** A 10b5-1 plan must be established while the insider is not privy to MNPI. This keeps things fair and square! ## Which of the following statements is true regarding Rule 10b5-1 plans? - [x] They offer more protection against legal consequences compared to ad-hoc selling strategies - [ ] They are primarily for selling vintage baseball cards - [ ] They provide extra cash rewards - [ ] They create opportunities for spontaneous trading fun > **Explanation:** 10b5-1 plans offer a legitimate method for insiders to sell shares while avoiding the typical insider trading stigma! ## If an insider continues to trade outside of their plan after selling shares, this could: - [ ] Make them super rich - [x] Raise red flags about potential insider trading - [ ] Help them win the trust of fellow executives - [ ] Pay for the coffee at the corporate party > **Explanation:** Deviating from a pre-planned schedule can draw scrutiny from regulators, leading to bad press—definitely not the goal! ## Pre-established sell plans need to have what elements defined? - [x] Price, amount, and dates of sales - [ ] The theme of the next company picnic - [ ] How to dodge grilling questions at an AGM - [ ] A surprise for your favorite employee > **Explanation:** Plans must outline specifics like price, amount, and timing, turning potential insider trading into planned sales! ## What does the SEC do in relation to Rule 10b5-1? - [x] Monitors compliance and investigates insider trading cases - [ ] Throws parties for compliance officers - [ ] Provides cooking classes to corporate executives - [ ] Advises on stock market recipes for success > **Explanation:** The SEC watches over 10b5-1 plans to ensure that they comply with the laws—like a financial umpire! ## If you don’t set up a 10b5-1 plan and are accused of insider trading, what might happen? - [x] You could face legal penalties and fines - [ ] You receive a surprise trophy for “Most Likely to Fail” - [ ] You may be invited to a judicial ball - [ ] You win a lifetime supply of stock > **Explanation:** Not having a pre-established plan can land executives in serious legal trouble! ## A properly crafted 10b5-1 plan requires: - [ ] Creative writing skills - [ ] Knowledge of knitting for long-term effectiveness - [x] Compliance with SEC provisions - [ ] The ability to predict future stock prices > **Explanation:** Compliance with SEC rules and regulations is paramount when creating a legit 10b5-1 plan! ## Failing to comply with Rule 10b5-1 could result in: - [x] Investigation for insider trading - [ ] Free pizza from SEC officials - [ ] Celebratory dances by contract lawyers - [ ] Getting to watch paint dry instead of trading > **Explanation:** Major consequences include possible investigations and sanctions against the accused!