September 16, 2011
I have been practicing corporate and securities law for 40 years. I think the most useless law and regulations on the books are those that relate to reporting and capturing short swing profits under Section 16 of the 1934 Act. Public companies spend millions of dollars in the aggregate complying with these provisions. The commission has who knows how many staffers working on them. But the purpose of the law--to prohibit insider trading--can be just as easily addressed by Rule 10b-5. In practice, these laws are a trap for the unwary. Those who have been found liable under the laws were not trading on inside information, they were simply not aware of the law or not aware that it applied to their circumstances. I submit that the public protection value of these laws is zero, but the aggregate cost of complying with them is in the millions. Companies pay Peter Romeo well over $500/hour to tell them how to fill out Forms 3 and 4. Let's abolish these archaic laws.