Profits an insider makes from short-swing trades in a domestic stock insurer’s equity security are recoverable by the insurer, and a recovery suit must be filed within two years of when the profit is realized.
Sec. 548.103. RECOVERY OF CERTAIN PROFITS. (a) The purpose of this section is to prevent the unfair use of information that may be obtained by an insider because of the insider's relationship with the domestic stock insurer. (b) Any profit realized by the insider from the purchase and sale or from the sale and purchase of an equity security of the domestic stock insurer within a period of less than six months inures to and is recoverable by the insurer. (c) A suit to recover the profit must be brought not later than the second anniversary of the date the profit is realized. The suit may be instituted at law or in equity by: (1) the domestic stock insurer; or (2) the owner of any security of the domestic stock insurer, in the name of and in behalf of the insurer, if the insurer does not: (A) bring suit not later than the 60th day after the date a request is made; or (B) diligently prosecute a suit that is timely brought by the insurer. (d) Subsection (b) applies regardless of whether: (1) the insider intended to hold the equity security purchased for longer than six months; or (2) the insider did not intend to repurchase the sold equity security during the six-month period following the date the insider sold the equity security. (e) Subsection (b) does not apply to: (1) a transaction in which an equity security was acquired in good faith in connection with a previously contracted debt; (2) a transaction in which the beneficial owner of an equity security was not the beneficial owner at both the time of the purchase and the time of the sale, or the sale and purchase, of the security involved; (3) a transaction involving an exempt security; (4) a transaction that the commissioner by rule exempts from this section because it is beyond the scope of the purpose of this section; or (5) a transaction involving an equity security of a domestic stock insurer that is not held by a dealer in an investment account if the transaction: (A) is in the ordinary course of the dealer's business; and (B) is incident to the establishment or maintenance by the dealer of a primary or secondary market, other than on an exchange, as defined by the federal Securities Exchange Act, for the security. (f) The commissioner may adopt rules the commissioner considers necessary or appropriate in the public interest to define and prescribe terms and conditions with respect to a security held in an investment account and a transaction made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market. Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1, 2005.