It is common for corporate executives to use a 10b5-1 plan to ensure adherence to insider trading laws and to avoid any chance of accusations of insider trading in US market.

A 10b5‐1 plan is a written plan for trading securities that is designed in accordance with Rule 10b5‐1 of the Securities Exchange Act of 1934 (the “Exchange Act”) in US, which allows insiders of a listed company to sell a pre-determined number of shares at a pre-determined time in accordance with insider trading laws.

In the trading plan, the price, trading amount, and sales dates must be specified in advance and determined by a formula or metrics. When making the sale plan, the seller must not have access to any material non-public information, e.g. during window-open period.

The following are a few key benefits of having a 10b5-1 plan:

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    An affirmative defense to insider trading allegations for persons trading pursuant to the plan

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    More opportunities for insiders to sell their shares, especially during a blackout period and greater certainty in planning the transactions

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    Potentially less negative news associated with insider sales

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    Less burden on legal counsel or compliance officers who would otherwise have to make subjective determinations about the availability or possession of material non‐public information each time an insider seeks to buy or sell shares

Learn how Computershare can help you with a 10b5-1 plan

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