Section 16(b) gives corporations a right to recover profits gained by these insiders if they buy and sell, or sell and buy, securities in their corporation within any six-month period
The Section 16(b) rule of the Securities and Exchange Act of 1934 was established to prevent insider trading and to prevent the owners of companies from profiting from stocks within or affiliated with their company. The provision applies only to officers, directors or shareholders who own more than 10 percent of the company's stock, and only if they trade in that company stock. “Section 16(b) seeks to prevent officers, directors, and 10-percent owners of public companies from using confidential corporate information for personal trading gain” (Romeo & Parrino,