Replies to post #31806 on InterDigital Inc (IDCC)

[Desert dweller]

I have read on this board that it could be stopped. If that is the case, Harry's sale is actually bullish because if there was bad news around the corner, even with a 10b-5 plan in place, Harry would be investigated on insider trading in todays environment, IMO. So he knows of nothing bad on the horizon and just followed through with his plan that he established when the stock was at $8. It really is a non event long term but we will have to drop, consolidate and then move higher as we get better and better news in the days, weeks and months ahead. I have no doubt today's weakness is due to Harry's sale but long term it wont matter.

[jmspaesq]

Vg_Futre:Yes 10(b)(5) Planned Sales CAN be STOPPED/Cancelled:

Here's some articles of relevance to this issue:
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http://www.careerjournal.com/jobhunting/benefits/stockoptions/20010810-bryan-low.html

Some Executives Exploit
New Insider-Selling Rules

By Cassell Bryan-Low
Staff Reporter of The Wall Street Journal

From The Wall Street Journal Online

Corporate executives are increasingly taking advantage of new rules on insider selling that critics say allow them to have their cake and sell it, too.

The rules let executives, directors and other insiders regularly dispose of their companies' shares with minimal disclosure, even when they have inside information that will affect the stock.

Here is how that is permitted under the rules: The executives set up a "prearranged" program to sell shares, vouching at the start that they don't know of any big pending news. And the kicker is that executives can terminate their selling plans when they want, without disclosing it.

It's all pretty convenient -- but it can leave investors in the dark.

Consider the case of Universal Access Inc., where two of its most senior executives announced in February they would start selling company shares as part of a regular plan that qualifies under new regulations for such selling.

The Chicago telecommunications-services provider's co-founders Patrick Shutt and Robert Pommer, neither of whom had sold any company shares since Universal's public offering in March 2000, detailed a plan in which each would sell as many as 555,000 shares over six months, which is 12% and 15% of their direct holdings, respectively. (In addition, each individual sold 300,000 shares around the time of the announcement.) The plans are "effective mechanisms to diversify a portion of our holdings" and "help increase liquidity in our stock," said Mr. Shutt, the company's chief executive, in a Feb. 8 news release, when the stock was trading at more than $12.

Little more than a month later, however, the company announced that "no shares are currently being sold" under the plans. Why? The share price had more than halved in that time and fallen below the $6 floor that each officer had originally specified. With the stock trading at less than $5 a share, Mr. Shutt said in a March 16 news release: "We do not believe current market prices accurately reflect the long-term value of Universal Access shares."

A Universal Access spokeswoman said the selling programs haven't been terminated at this point, only that the current share price fell below the minimum price specified in the plans.

So goes an interesting twist to a rule introduced in October by the Securities and Exchange Commission. The rule was designed to provide a safe way for executives to sell shares without running afoul of insider-trading laws. The ruling was a boon for executives, many of whom have large chunks of their personal wealth tied up in their own stock, who often are prevented from trading for much of the year because of what they know. Under this new Rule 10b5-1, insiders need only to be able to claim they aren't aware of material nonpublic, or "inside," information when the plan was established.

But all this can be a bit confusing for investors tracking insider-trading data. Once, investors could simply look at whether corporate insiders were buying or selling and factor it into their investment decisions. Under the new rules, however, it will become less clear that insider sales, by themselves, are a bearish sign. In the case of Universal Access, it isn't necessarily bullish just because insiders decided not to sell.

Some analysts say with executives still free to terminate the plans at any time, they retain an insider advantage. That's because if they find out about some news that could bump up their stock, they can then opt out of the plans to sell if the shares are depressed. "Discretionary not selling is not all that different from discretionary selling," says Paul Elliott, who tracks insider purchases and sales at Thomson Financial/First Call.

Moreover, critics of the plans say that with scant requirements for disclosure, investors are left pretty much in the dark. While insiders need to note that the sale is part of a prearranged plan or previously given trading instructions and the date it was established when they indicate their intention to sell (on a "form 144" filed with regulators), they aren't required to disclose details of the plan. Similarly, executives aren't required to announce they have adopted a plan in the first place or that they have terminated or amended it.

"These plans ought to be disclosed when they are adopted," as well as when "an insider removes himself from the automatic process," says David Coleman, editor of Vickers Weekly Insider newsletter. The lack of disclosure "does little to level the playing field in an arena where management already has a significant advantage." While not required, some companies have issued announcements about adopting these plans to prepare shareholders for coming share sales.

Executives have increasingly been using such plans, however adoption has been slower than some experts had expected. This is partly because of the stock-market decline -- currently low prices have been holding back some executives from selling their shares -- and because some companies aren't sure exactly how regulators will apply the rule. One such gray area surrounds the termination of the plans, which insiders are technically allowed to do -- the theory being that they aren't violating the law if they decide not to trade. But because the rule requires the plans be entered into in "good faith," many are cautious about how the SEC will treat those who choose to opt out on one or repeated occasions.

Six months after the rule was enacted, less than 1% of insider transactions occurred under these types of prearranged plans, estimates Jonathan Moreland, research director at Edgar Online Inc.'s InsiderTrader.com, a Web site that aggregates insider-trading data.

Nevertheless, the use of such plans is expected to grow significantly. "As the market continues to recover, you will see momentum build" in the use of these plans, predicts Don Weigandt, vice president for wealth strategy at J.P. Morgan Private Bank, a division of J.P. Morgan Chase & Co., who says the plans have received a lot of interest from his clients, many of whom are chief executives.

Already, executives at companies ranging from Amazon.com Inc., JDS Uniphase Corp., Juno Online Services Inc., VoiceStream Wireless Corp., and Wm. Wrigley Jr. Co., have adopted such plans.

Anthony Muller, chief financial officer and one of 10 insiders at San Jose, Calif., fiber-optics equipment maker JDS Uniphase to have embraced the new ruling, says his company's trading windows around earnings announcements are typically open only four to five weeks every quarter. However, having been active in terms of mergers and acquisitions in recent years, in practice "the windows were considerably smaller than that and there were many quarters when the windows were not open at all." For insiders, he says, the advantage of the new rule "is to achieve some personal diversification in a way that decouples it with the market or what the current news is."
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Faegre & Benson LLP: How to Implement an Effective Insider Trading Policy
http://www.faegre.com/articles/article_409.asp

How to Implement an Effective Insider Trading Policy
By Peggy Steif Abram

Peggy Steif Abram is a partner in Corporate Finance at Faegre & Benson and provides general counsel services to Hutchinson Technology.

With insider trading scandals making headlines, and the SEC cracking down on everyone from chat room junkies to CEOs and porn stars, it's tempting to conclude that illegal trading is already a high-profile topic at most public companies. Don't be so sure.

I had an opportunity to talk with a friend who was a former controller of a public corporation and asked him about the approach the company took in its insider trading policy. His response? He didn't know if the company had a policy. And it's safe to conclude that if the controller didn't know, no one else did, either.

Unfortunately, many companies only discover the deficiencies in their policy in the midst of a regulatory investigation. As any officer who has weathered such an investigation knows, it's an expensive, time-consuming, and risk-laden process. The SEC has stepped up its enforcement program, declaring "zero tolerance" for fraudulent trading and releasing new proposals that toughen the standards for insiders. As a result, public companies need to take a hard look at their insider trading policies and how they communicate and enforce them.

Raising the Bar for Insiders

While there is no statutory definition of insider trading, courts have generally held that insider trading means buying or selling securities based on material, nonpublic information. The definition of "material" will vary from case to case and company to company, but in general, it includes information that would influence you or others in making an investment decision, such as financial reports, upcoming mergers or offerings, important product or customer news, litigation, etc. "Nonpublic," obviously, means that you possess or receive information not generally available to other investors. In other words, you've got an unfair advantage in the market.

Courts have been divided, however, as to whether an individual must actually use inside information while trading to be liable for fraud, or whether simple awareness of inside information while trading creates liability. The SEC recently proposed a new rule to clarify this issue, and their proposal raises the bar for insiders.

Under the proposed rule, it would be illegal to trade while in possession of material, nonpublic information, regardless of whether you actually "used" that information in making the decision to trade. However, the SEC does note four circumstances under which trading would be permissible:

If you entered into a binding contract to make a trade at a specific price and date for a specific number of shares prior to receiving material, nonpublic information;
If you directed someone, such as a broker, to make a trade at a specific price and date for a specific number of shares before receiving the information;
If you established a written plan of trades with specific dates, amounts, and prices prior to receiving the information;
If you established a written plan designed to track a market index, segment, or other group of securities prior to receiving the information.
Even with these exceptions, it's easy to take a wrong turn. If, for example, a contract called for purchase of 1,000 shares, and you increased that amount to 2,000 shares after receiving inside information, the entire trade would violate the proposed rule. In the case of written plans, too, amending the terms of the plan after receiving inside information (by delaying a trade, for example) could be considered fraudulent.

Developing a Policy

Individuals who engage in insider trading face harsh civil and criminal penalties, including large fines and jail time. But companies are at risk, too. If public companies, or partners such as investment banks that share inside information, fail to take steps to prevent insider trading, they face significant monetary penalties and a wide range of other civil and criminal sanctions.

The length, detail, and specific procedures of an insider trading policy will depend on your business and an assessment of your risk. In general, the policy should lay out the restrictions regarding insider trading, as well as the consequences for trading in violation of the policy. For example, the policy should make clear:

Trading by employees who possess material, nonpublic information is prohibited, as is "tipping" others who may trade;
The prohibition covers both the securities of the company, as well as those of other companies, including customers and clients, whose information may become known to employees;
"Material" information covers anything that may influence a decision to buy or sell securities (use examples in your policy);
Information is considered "nonpublic" until some specific action, such as a press release, takes place;
Failure to observe the policy may result in termination and the possibility of civil and criminal sanctions.
Most policies define the restrictions on trading, either by setting out a time frame in which you can trade (a "window") or setting out a time frame in which you cannot trade (a "blackout"). A window, for example, might permit trading a day or two after quarterly earnings are released, or even faster now that Internet communication has become the norm. A blackout, in contrast, might prohibit trading in the time period leading up to an earnings release, until the material information is made public.

Trading restrictions, however, can offer a false sense of security. Even during a window, insiders should not trade if they possess material, nonpublic information. For example, if active merger discussions are in process during a window, any trading during that time period could still be considered fraudulent. As a result, many companies also establish "pre-clearance" procedures in their policy, which require insiders to seek approval before trading.

Generally, one senior administrative person serves as the clearinghouse for trading requests and either makes the judgment personally or calls counsel to assess the implications of a trade in light of material, nonpublic information. This procedure adds control and discipline to your insider trading policy, although it can run the risk of creating bottlenecks. Pre-clearance may only need to cover directors and some officers, depending on the size and type of your organization. Indeed, going too deep in the organization with pre-clearance may sometimes cause problems: you may end up having to deny a trade to someone who is not in the loop on an important transaction and, in the process, disclose inside information inappropriately.

Positive Reinforcement

Developing a good policy isn't enough. As with any written policy, you're actually in a worse legal position if you establish a policy and then fail to monitor and enforce it. Some companies require new employees to sign a statement that they have read the insider trading policy - and that's the end of their education program. But the SEC Deputy Director of Enforcement recently wrote, in the context of several insider trading cases, that a signed statement is no substitute for ingraining a sense of ethics.

So companies may wish to take further steps, such as:

Using technology such as interactive video or CD-ROM to engage employees with hypothetical situations, to better educate them about potential ethical issues involving trades;
Requiring periodic recertifications;
Sending reminders about the details of the policy before a window opens or shuts (as with blackouts);
Reviewing and updating the policy as regulations and case law change;
Keeping a detailed record of your compliance and training efforts.
Obviously, the government is cracking down, particularly as trading becomes more "democratized" through online brokerages, in order to retain confidence and fairness in the markets. But in the wake of the new rules proposed by the SEC, some insiders may wonder if it's ever okay to trade in your company's stock. Does the "awareness" standard make it virtually impossible to buy or sell?

Not necessarily. As noted above, the SEC does suggest some loopholes, such as the ability to create in advance, and execute, a written plan of trades at specific times and prices. Following such a plan is an affirmative defense against allegations of insider trading, assuming the plan was created in good faith and not simply as an attempt to "get around" the regulations. Even so, the SEC has clearly limited the investment flexibility of insiders - and a company's insider trading policy must reflect that reality.

There is no "model" policy that can be used by every company. Trading restrictions, pre-clearance procedures, and other specifics must be tailored to the risks of your business. The seasonality of your business, or the flow of certain types of information within the organization, should be considered in developing the policy and determining how it applies to different levels of administrative and executive staff.

But the bottom line is the same: the extent to which you make a good faith effort to eliminate insider trading will minimize your risk if the SEC comes calling.

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What are the SEC rules for an insider, such as an officer, director, or employee, buying and selling company stock? Isn't th
http://sec.broaddaylight.com/sec/FAQ_18_5578.shtm

What are the SEC rules for an insider, such as an officer, director, or employee, buying and selling company stock? Isn't that illegal insider trading?

Your Answer: Answer last updated: 06-06-02

Insider trading takes place legally every day, when corporate insiders - including officers, directors, and individuals who hold more than 10% of the company's stock (regardless of whether they work for the company) -- buy or sell stock in their own companies pursuant to company policy and the regulations that govern this type of trading. For example, the company may require insiders to sign a "lockup agreement," prohibiting them from selling their shares for a set period of time after an initial public offering. Or it may designate specific "black-out" periods, during which insiders cannot trade the company's stock.
Section 16(a) of the Securities Exchange Act of 1934 discusses the reporting requirements for officers, directors, and beneficial owners, mandating that these individuals file with the SEC various statements concerning their ownership of the company's stock. You can read about the required disclosures in our "Fast Answer" on Forms 3, 4, and 5.

Section 16(b) of the Exchange Act prohibits short-swing profits (profits realized in any period less than six months) by corporate insiders in their own corporation's stock, except in very limited circumstances. Section 16(b) is designed to prevent insider trading by those most likely to be privy to important corporate information.

If you want to purchase securities from an insider, you should first ascertain whether the securities are considered "control" securities. Control securities are those held by an affiliate of the issuing company. An affiliate is a person, such as a director or large shareholder, in a relationship of control with the issuer. Control means the power to direct the management and policies of the company in question, whether through the ownership of voting securities, by contract, or otherwise. If you buy securities from a controlling person or "affiliate," you'll have restricted securities, even if they were not restricted in the affiliate's hands. For more information about "control" and "restricted" securities, please read our publication entitled Rule 144: Selling Restricted and Control Securities.

What is the length of the quiet period BEFORE an earnings announcement?
http://sec.broaddaylight.com/sec/FAQ_20_2617.shtm

What is the length of the quiet period BEFORE an earnings announcement?

Your Answer: Answer last updated: 07-12-01

There is no such thing as a "quiet period" or period of silence before a company announces its quarterly or year-end financial results. The term "quiet period" -- also referred to as the "waiting period" -- is not actually defined under the federal securities laws. It generally refers to the period that begins when a company files a registration statement with the SEC and lasts until the SEC's staff has declared the registration statement "effective." During this period, the federal securities laws limit what information a company and related parties can release to the public.
You can learn more about the quiet period -- including the rules that outline the limitations on a company's statements during the quiet period -- by reading our Fast Answer on this topic. To the extent that you are interested in selective disclosure to analysts prior to an earnings announcement, please read our Fast Answer on Selective Disclosure and Fair Disclosure, Regulation FD.


What rule prohibits insiders from realizing trading profits in their company's stock in any period of less than six (6) months?
http://sec.broaddaylight.com/sec/FAQ_18_12566.shtm

What rule prohibits insiders from realizing trading profits in their company's stock in any period of less than six (6) months?

Your Answer: Answer last updated: 09-25-02

Section 16(b) of the Exchange Act prohibits short-swing profits (profits realized in any period less than six months) by corporate insiders in their own corporation's stock, except in very limited circumstances. Section 16(b) is designed to prevent insider trading by those most likely to be privy to important corporate information.