Legal Definitions - short-swing profits

Short-swing profits refer to the profits made by a corporate insider when they buy and sell or sell and buy company stock within a period of six months. These profits are subject to being returned to the company.

For instance, if a CEO of a company buys 1,000 shares of company stock in January and then sells them in March for a profit, they would be required to return that profit to the company. Similarly, if an executive sells 500 shares of company stock in May and then buys them back in August for a profit, they would also be required to return that profit to the company.

These examples illustrate how short-swing profits work. The Securities and Exchange Commission (SEC) created this rule to prevent insiders from taking advantage of their position and making quick profits at the expense of the company and its shareholders. By requiring insiders to return these profits, it helps to ensure that they act in the best interest of the company and its shareholders.