Short-Swing Profit Rule
A Securities & Exchange Commission regulation that requires company insiders to return any profits made from the purchase and sale of company stock if both transactions occur within a six-month period. A company insider, as determined by the rule, is any officer, director or holder of more than 10% of the company's shares.
Investopedia Commentary
The rule was implemented to prevent insiders, who have greater access to material company information, from taking advantage of information for the purpose of making short-term profits. For example, if an officer buys 100 shares at $5 in January and sells these same shares in February for $6, he/she would have made a profit of $100. Because the shares were bought and sold within a six-month period, the officer would have to return the $100 to the company under the short-swing profit rule.
Related Links
Policing The Securities Market: An Overview Of The SEC
Uncovering Insider Trading
When Insiders Buy, Should Investors Join Them?
See also: Chief Executive Officer - CEO, Inside Director, Insider, Insider Information, Insider Trading, Material Insider Information, Securities & Exchange Commission - SEC
Also spelled: short-swing rule, short swing profit rule, short swing rule