Under current rules, it is up to officers and directors to file reports on their activities. Most trades are disclosed on forms that must be filed by the 10th day of the month after the trade was made -- a period that can be 40 days after the trade.
But some other transactions -- those between the company and the executive -- need be reported only on an annual report that is due 45 days after the end of the company's fiscal year. As a result, Lay's filings seemed to indicate he had exercised options and not sold the stock in August, when in fact he had sold the stock back to the company in a transaction that was not disclosed for months.
The proposed rule states the new reports will have to be filed by the company using the form companies now use for important disclosures that occur between quarterly filings, and a result may be a flood of filings. Some may propose that the commission devise a new form for those filings.
Under the new rules, filings related to transactions by officers or directors would be due within two business days if the amount involved is US$100,000 or more. Most reports on smaller transactions would be due on the second business day of the next week. But if transactions involve less than US$10,000, they can be delayed until a single executive's total transactions exceed that amount.
The current insider trading forms would still have to be filed by executives on the current schedule, weeks or months after the trades were disclosed by the company.
The actual proposed rule was not released Thursday, and it was not clear if it would cover one current controversy, in which Adelphia Communications allowed companies controlled by its top executives to be "co-borrowers" from banks. They had borrowed US$2.3 billion, in loans the company could eventually have to repay, before the company disclosed what had happened. But Beller of the SEC said that "the rule should cover" such a case and that if it did not do so it might be modified.
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