What is a Rule 10b5-1 trading plan?

A Rule 10b5-1 plan arranges trades before they take place. It can provide an affirmative defense to insider-trading liability when its conditions are satisfied, including adoption without awareness of material nonpublic information. The arrangement can set trading terms or delegate decisions within the rule's limits.

What the rules require

The SEC compliance guide describes good-faith requirements, director and officer certifications, restrictions on overlapping arrangements, and limits on single-trade plans. Exceptions and the type of participant matter.

Cooling-off periods before trading

• For directors and officers, trading generally waits until the later of 90 days after adoption or certain modifications, or two business days after the relevant quarter's financial results are disclosed. The required period is capped at 120 days.
• For other persons covered by the rule, except the issuer, the cooling-off period is 30 days.

See the SEC adopting release for the precise conditions. A plan designation is not proof that every condition was satisfied.

Find the disclosure on Form 4

Check the plan checkbox and adoption date in the explanation of responses. A purchase can still carry transaction code P when made under a plan. Older filings may have different disclosure formats.

Interpret the timing of a purchase

A scheduled execution may reflect an earlier decision rather than a new assessment of today's price. Neither a scheduled nor an unscheduled purchase establishes a future return. Compare adoption, transaction, and filing dates using the filing walkthrough.

How this affects cluster research

Our detector groups qualifying purchases without independently excluding every 10b5-1 trade. Review the detection methodology and source filings in the stock directory before interpreting whether buyers acted on separate recent decisions.