Replies to post #171857 on Amarin Corp Plc (AMRN)

[IslandOfMisfitToys]

jt0082, that is not my understanding. Based on my reading, the 10b5-1, if properly constructed and administered, provides a defense against the presumption that trades were made with MNPI in possession.

Terminations are permitted, but the burden is then on the individual to demonstrate that the termination wasn't made as a result of obtaining MNPI.

In this case, let's say BO discussions with Pfizer commenced on 12/15/2018, and the 10b5-1 plans were put in place after AHA in November of 2018 (which would make sense). If the deal got announced on Monday, and there was a set plan to sell x shares obtained from y option exercises at z price or better within r timeframe, and that plan got cancelled after 12/15/2018 -- and the SEC looked into it, the defense against the presumption would almost certainly fail.

So in a sense you are right -- the plans can be terminated -- but not pursuant to obtaining MNPI that is still pertinent during the planned trading period. Not without personal legal risk.

[CaptBeer]

Modifications, suspension and termination actions are technically all permitted but may weaken the good faith defense. A change is permissible if the participant does not have MNPI at such time.

[sts66]

You'd really be playing with fire if you terminated or amended a 10b5-1 trading plan when AMRN is in it's current position as a BO target - below are two cases where insiders got busted for amending their plans:

https://www.americanbar.org/groups/business_law/publications/blt/2009/11/keeping_current/

Directors and officers of public companies frequently rely on so-called Rule 10b5-1 trading plans when transacting in their companies' stock. As a safe harbor from insider trading liability under the SEC's Rule 10b-5, Rule 10b5-1 provides that a purchase or sale of securities will not be deemed to be on the basis of material nonpublic information if it is pursuant to a contract, instruction, or plan that

was entered into before the person became aware of the information;

specifies the amounts, prices, and dates for transactions under the plan (or includes a formula for determining them); and

does not later allow the person to influence how, when, or whether transactions will occur.

In addition, the plan must be entered into in good faith and not as part of a scheme to evade the insider trading laws.

The SEC's recent insider trading case against the former CEO of Countrywide Financial highlights the agency's continuing concern about abuses of Rule 10b5-1 plans. In addition, the SEC's Division of Corporation Finance recently updated its publicly available interpretations about these plans.

In light of these developments, executives and directors of public companies should pay renewed attention to the timing and substance of their trading plan activities. Particular care should be taken to avoid adopting or amending trading plans when in possession of material nonpublic information. Structured properly, however, Rule 10b5-1 plans remain useful tools to mitigate corporate insiders' litigation risk.

Recent Litigation on 10b5-1 Plans
Alleged abuses of Rule 10b5-1 plans have taken center stage in a number of recent insider trading lawsuits. In one high-profile example, the SEC filed a civil complaint on June 4, 2009, against the former CEO of Countrywide Financial, Angelo Mozilo, and other former Countrywide executives, alleging that they used Rule 10b5-1 plans to trade illegally on inside information (to the tune of nearly $140 million, in Mr. Mozilo's case). Although all of these sales occurred through Rule 10b5-1 plans, the SEC alleges—citing internal correspondence such as an e-mail stating that the company was "flying blind"—that Mr. Mozilo had material nonpublic information about Countrywide's deteriorating mortgage business when he instituted his trading plans. The SEC also took particular note of the fact that he implemented no fewer than four separate plans during a three-month period, and that sales under the plans began soon after their adoption. SEC v. Mozilo, No. 09CV03994 (C.D. Cal. filed June 4, 2009).

The case also highlights the advisability of avoiding amendments to Rule 10b5-1 plans. The SEC's complaint emphasizes that Mr. Mozilo amended one of his plans just two months after adopting it, essentially doubling the number of shares at a time when Countrywide's stock price was at a historic high—but retaining the same time schedule for sales. This amendment also was found particularly noteworthy by the federal judge in an earlier lawsuit against Mr. Mozilo by private investors. In re Countrywide Financial Corp., 554 F. Supp. 2d 1044 (C.D. Cal. 2008). In refusing to dismiss the case, the judge stated that he "actively amended and modified his 10b5-1 plans . . . Mozilo's actions appear to defeat the very purpose of 10b5-1 plans, which were created to allow corporate insiders to 'passively' sell their stock based on triggers, such as specified dates and prices, without direct involvement."

Other aggrieved investors have seized on perceived abuses of Rule 10b5-1 plans to pursue insider trading claims. For example, in April 2009, a California federal court refused to dismiss a lawsuit against a technology company's officers, based partly on allegations that they amended their 10b5-1 plans to sell more stock before the market learned of a significant business development. This was deemed sufficient to support an inference of scienter, the state of mind required in a private Rule 10b-5 insider trading lawsuit. The judge also commented that the pattern of the executives' sales "does not square with a typical 10b5-1 plan triggering stock sales on certain dates and at certain prices," noting that the executives sold varying amounts of stock just before the adverse development became public, and on varying dates rather than regular dates such as the first of every month. Backe v. Novatel Wireless, Inc., 607 F. Supp. 2d 1145 (S.D. Cal. 2009).