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10b5-1 Plans

A Rule 10b5-1 plan is a prearranged trading plan under SEC Rule 10b5-1 that provides a defense against charges of insider trading if you later trade stock while you know confidential, important information about your company. It’s a program for the periodic purchase and/or sale of your stock that meets the requirements of this SEC rule. When properly created, these plans provide company insiders with a way to diversify their interest in company stock and, hopefully, manage the media and market reaction to executive stock sales.

Many companies now either require or strongly encourage their executives and directors to set up Rule 10b5-1 plans for trading company stock. Your company may even let you sell shares through these plans during regularly scheduled quarterly blackout periods.

How it Works

Typically, Rule 10b5-1 trading plans specify the number of shares to be sold (or purchased) at the price and date detailed and/or have a formula or algorithm that triggers the trade and the number of shares involved. If its conditions are met, Rule 10b5-1(c) sets forth an "affirmative defense" in litigation over insider trading. When stock-trading occurs under one of these plans before the outset of the alleged fraud, the plan can undermine any inference of suspicious trades for assessing scienter (i.e. fraudulent intent).

Want to Learn More?

If you believe a 10b5-1 plan is worth considering, please contact me and let’s look at your choices together.

For more information send me a quick email or call the office. | (203) 513-6331