Replies to post #151799 on Biotech Values

[JJM760]

Interesting paragraph from the same Wiki 10b5-1 definition Peter posted before:

In paragraph (c), however, the SEC created an affirmative defense to any charge of insider trading, "designed to cover situations in which a person can demonstrate that the material nonpublic information was not a factor in the trading decision."[3] The provision allows an affirmative defense to insider trading when the trade was made pursuant to a contract, instructions given to another, or a written plan that "[d]id not permit the person to exercise any subsequent influence over how, when, or whether to effect purchases or sales" (10b5-1(c)(1)(i)(B)(3)), and where the plan (or contract or instructions) was created before the person had inside information.
For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.

As you stated, the burden of proof is on the government.