The Securities and Exchange Commission (SEC) has set rules to ensure that employees are not at a disadvantage during a blackout period. The SEC prohibits any director or executive officer of an issuer of any equity security from purchasing, selling or otherwise acquiring or transferring securities during a pension plan blackout period.2
In addition, the SEC has established rules requiring the issuer to notify the director or executive officer when imposing a blackout period.3
The purpose of these rules is to prevent insider trading that could otherwise occur during the period when changes are being made. Insider trading is illegal when material information about a company has not been made public and has been traded on. This is because the information gives those having this knowledge an unfair advantage.
However, the financial security of employees who are unable to make changes during a blackout period may be jeopardized. Therefore, SEC regulations stipulate that employees must receive advance warning about the occurrence of blackout periods
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.