Regulatory Reform and Opportunistic Insider Trading

Anantha Divakaruni, Hedda Rytter Tveiten and Hans K. Hvide

No 21199, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We provide the first large-scale quasi-experimental evidence on the effectiveness of tightening insider trading regulation. The SEC in 2022 eliminated several loopholes in the regulation of 10b5- 1 trading plans. Linking 158,000 stock sales by company executives to plan adoption dates, we document substantial pre-reform abnormal returns for “loophole trades†including single-trade plans and sales shortly after plan adoption. Although the reform shut the loopholes, executives’ abnormal returns did not decline. Plausible mechanisms include self-policing before the reform and shifting opportunistic trading toward the rule’s margin afterward. Our results highlight limits of legal design aimed at reducing insider opportunism.

Keywords: Insider; trading (search for similar items in EconPapers)
JEL-codes: G14 G18 G34 J33 K22 K42 (search for similar items in EconPapers)
Date: 2026-02
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