Intel CEO’s stock sales seen warranting SEC examination
Intel Corp. Chief Executive Officer Brian Krzanich’s sale of a chunk of company stock in the fourth quarter of last year has prompted questions about the transaction’s timing because it happened after the discovery that modern processors are vulnerable to hackers.
Intel says Krzanich’s sales were part of a pre-arranged stock plan with an automated schedule, but some securities lawyers say the larger-than-usual transaction will probably be examined by the U.S. Securities & Exchange Commission.
“The size of the transaction makes it inevitable that the SEC will take a look at this,” said Stephen Crimmins, a former SEC enforcement lawyer who now works for Murphy & McGonigle. “But I have to believe that the executive would have been exceptionally well advised by a good securities lawyer and everything would have been cleared. People who are CEOs of companies like Intel don’t make mistakes like this.”
Under the SEC’s 10b5-1 rule - designed to help avoid accusations of insider trading - executives can set up plans to sell a pre-determined number of shares at pre-determined times. Krzanich has been doing so since at least 2015. But his latest sale coincided with revelations that all modern processors can be attacked, potentially exposing crucial data, such as passwords and encryption keys. The news sent Intel shares tumbling last week.
Two other things also attracted attention. Krzanich changed the timing of his trading instructions. In 2015, 2016 and 2017, his sales instructions were issued in June, April and February, respectively; however, this past October he issued a new set of instructions. Plus, he sold thousands more shares last year than in previous years, though the sale coincided with the biggest payout of performance-based shares he’s gotten since at least 2012.
“Brian’s sale is unrelated,” a company spokesman said last week. “It was made pursuant to a pre-arranged stock sale plan with an automated sale schedule. He continues to hold shares in line with corporate guidelines.” Intel had no further comment on Monday.
According to filings, on Nov. 29, Krzanich exercised and sold 644,135 options and sold an additional 245,743 shares that he already owned. That sale decreased his overall holdings by about 50 percent, bringing his ownership level nearer to what he held at the end of 2013 and at the minimum number of shares he must hold under Intel’s ownership requirements, according to the recent proxy filing.
Each of those share transactions were made according to the pre-arranged trading plan, with the sale instructions determined at the end of October. The first mention of these planned trade decisions was in June 2015.