A short swing rule restricts officers and insiders of a company from making short-term profits at the expense of the firm.
It is part of United States federal securities law, and is a prophylactic measure intended to guard against so-called insider trading.
As stated by a federal circuit court of appeals: In order to achieve its goals [of curbing the evils of insider trading], Congress chose a relatively arbitrary rule capable of easy administration.
The objective standard of Section 16(b) imposes strict liability upon substantially all transactions occurring within the statutory time period, regardless of the intent of the insider or the existence of actual speculation.
This approach maximized the ability of the rule to eradicate speculative abuses by reducing difficulties in proof.