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Short-swing profit rule

A strict-liability US rule requiring insiders to disgorge profits from any purchase and sale, in either order, within six months of each other, regardless of intent or information.

The computation is deliberately punitive. Any purchase is matched against any sale within six months to produce the maximum recoverable profit, so a sequence of trades can generate a liability even when the insider lost money overall.

Intent is irrelevant and there is no inside-information element. The claim belongs to the issuer, and if it does not act, any shareholder may sue on its behalf, which supports a small industry of plaintiffs' firms scanning form-4 filings.

This is why insiders use scheduled sales, avoid opportunistic round trips, and clear every transaction with counsel. It also explains the awkward six-month gaps you see in insider trading records around option exercises.

Related: section-16-insider, form-4, rule-10b5-1-plan, insider-trading

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