Short-Swing profits are defined by which rule?

Short-swing profits are defined by Rule 16b of the Securities Exchange Act of 1934. This rule specifically addresses the trading of equity securities by corporate insiders and mandates that any profits realized from the purchase and sale, or sale and purchase, of the company’s stock within a six-month period must be returned to the company. The intent behind this rule is to prevent insiders from profiting on non-public information, as they may have access to material information that could influence stock prices.

The enforcement of Rule 16b serves to promote fairness in the market by discouraging insider trading and ensuring that any profits made by insiders from short-term trading are effectively captured back by the company. This regulation helps maintain investor trust in the integrity of the securities markets, reflecting a broader commitment to transparency and fairness in trading practices.