Legal Question in Securities Law in California

Re: Securities - Rule 10b-5 & 16(b)

First, your question suggests you have the thrust of these two laws mixed up. 10b-5 has to do with insider trading, trading on undisclosed information by anyone, etc. while 16(b) restricts short-swing trading by certain insiders.

Sounds like you committed at least a technical violation of Rule 10b-5, but maybe not based on full facts. Employees with access to information that could affect stock price have a duty to 'disclose or refrain' and since you probably couldn't disclose what you knew, your proper course was to refrain from trading.

Whether you really have anything to worry about depends upon additional facts such as how much of an insider you were, the materiality of your information, the size of your purchases, whether they were outside the mainstream of routine investment in your employer, etc. Not every technical violation is sufficiently culpable to warrant investigation and prosecution. An attorney would need to know a lot more about the facts and circumstances to evaluate your case.

10b-5 applies to anyone. To come under Rule 16(b), however, you have to be a director, high-ranking officer or 10% (or more) holder. Also the company's securities must be subject to registration (i.e. public) or held by 500 or more shareholders. The restriction is, in general, against 'round-tripping' (e.g. buying then selling) within a six-month period.