To prevent insider trading, and to reduce the need to constantly monitor and evaluate individual requests to trade company stock, most companies adopt rules that prevent all employees from trading during certain periods. These are known as "blackout" periods. Some companies do not apply blackout rules to former employees, though you still cannot trade if you know important secret information.
Alert: Even if you are not in a blackout period, you still may need to preclear all trades in company stock with your legal or compliance department. This is common for executives, directors, and employees with access to sensitive information.
For example, a common type of company-wide blackout period occurs before and after the announcement of quarterly earnings. This blackout period typically includes the last month of a company's fiscal quarter and the first few business days after an earnings announcement. Blackout periods can also arise suddenly and can apply only to employees who have access to confidential information (e.g. when a small group is finalizing a big merger or new product). If you face blackout periods at potentially awkward times, you may want to consider putting into place a Rule 10b5-1 trading plan. When set up correctly, this can allow predetermined stock trades even during blackouts.
Alert: A blackout period can also prevent you from selling shares to cover taxes when you exercise stock options or when restricted stock/RSUs vest. |
