UPDATE: March 2022
Things to Consider During Blackouts and Quiet Periods – Even though there are several rules and regulations surrounding insider trading activity, investors must be wary about what to do during insider trading blackouts and quiet periods. They are both important policies that must be understood and implemented accordingly. If you are a company executive and insider, you must know how these periods will affect you and your legal obligations. So, here are some of the things you must consider during blackouts and quiet periods.
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Insider Trading Blackout Periods
When a company implements a blackout period, corporate insiders will not be allowed to buy and sell company shares during this period. The restrictions are implemented to reduce the risk of insider trading by insiders who have access to nonpublic information. There are two main categories of blackout periods that insiders must be aware of:
1. Quarterly Blackout Periods
Most companies choose to implement a quarterly blackout period for all insiders and employees before releasing their financial statements and earnings reports to the public. These blackout periods will begin from the first day of the end of a quarter and end two days after the financial reports have been released to the public.
2. Specially Mandated Blackout Periods
There are instances when a company may choose to impose a special blackout period to prevent insiders from trading company shares before a major announcement that may affect the company’s share price. That could be mainly before a merger or when a company is introducing a new product.
Insider Trading Quiet Periods
An insider trading quiet period will be implemented by a company when they want to limit the interactions with the public because insiders may have access to nonpublic information. The company generally implements a quiet period before it plans to make a major announcement regarding the company’s future.
Companies choose to implement insider trading quiet periods because they don’t want material information to become public knowledge before they announce it. The intention behind blackout periods is that the company wants to prevent corporate insiders from trading in the market before any information is released to the public. Therefore, as an insider, it is best to follow the rules related to blackouts and quiet periods and ensure that you don’t end up on the wrong side of the law.
Conclusion to Things to Consider During Blackouts and Quiet Periods
Suppose you are an insider and unwillingly trade in the market during a blackout period or interact with the public during a quiet period. In that case, you could be subjected to financial penalties from the company. You can also be released from your position in the company. Hence, you should always be careful and follow the rules during blackouts and quiet periods.
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