SEC Law: Rule 10b5-1 Trading Plans

How To Use Rule 10b5-1 Trading Plans To Sell Company Stock (Part 1)

Darryl Rains and Sunil Kulkarni
When you receive a significant portion of your compensation in equity awards, concerns about diversification and cash flow may prompt you to sell company stock regularly. Yet SEC rules, insider-trading policies at your company, and fears of insider-trading allegations can keep you from selling your shares. Rule 10b5-1 trading plans are an ideal solution, as long as they are properly drafted and implemented.

How To Use Rule 10b5-1 Trading Plans To Sell Company Stock (Part 2)

Darryl Rains and Sunil Kulkarni
A Rule 10b5-1 trading plan is an ideal solution when SEC regulations and corporate insider-trading policies would otherwise keep you from selling your shares. However, to be effective these plans must be properly implemented. Part 2 explores their restrictions and flexibility, and how to disclose them.

How Executives And Directors Can Avoid SEC Troubles Before Trading Their Company Stock
(Part 1)

Merrill Freed and Steven Schraibman
Your advisors say now is the time to buy or sell your company stock or to exercise options. But before you proceed, you'd better understand the securities laws that apply. Otherwise, you risk losing your profits, paying big fines, attracting unwanted media attention, and perhaps even going to jail. The storm of controversy over the backdating of stock option grants shows how closely executive stock sales are scrutinized.

Elevated Enforcement

Julius Melnitzer
Inside Counsel
The SEC's intensified search for insider trading includes enhanced scrutiny of Rule 10b5-1 trading plans.

The SEC Is Eyeing Insider Stock Sales

Jane Sasseen
BusinessWeek
Concerned about patterns of trades before bad news and abuses that signal insider trading, the SEC is looking into Rule 10b5-1 plans.

Rule Change Will Make It Easier For Insiders To Make Legal Trades: New SEC Regulation [On Insider Trading] Is Little Known But Could Have Big Impact

Kathleen Pender
San Francisco Chronicle
The SEC has established an "affirmative defense" against charges of illegal insider trading if a person specifically agreed to a trade in a written contract before learning important inside information. This could be a godsend for executives who own a lot of company stock and want to diversify their holdings but have trouble in finding a window of opportunity to sell.

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What is a Rule 10b5-1 trading plan?

SEC Rule 10b5-1 provides a defense against charges of insider trading if you later trade stock while you know confidential, important information about your company. A Rule 10b5-1 trading plan is a program for the preset purchase and/or sale of your stock that meets the requirements of this SEC rule, including the need to...

What are best practices for Rule 10b5-1 trading plans?

SEC Rule 10b5-1 does not have many details on setting up and operating these prearranged stock-trading plans. Best practices have evolved for companies and insiders to follow. These include...

I want to set up a program with my company and broker in which I automatically exercise options and sell stock to pay a regularly expected bill as it's received, such as my child's tuition. Can this prearranged selling plan violate insider trading laws and my company's blackout rules?

You are in luck. SEC Rule 10b5-1 now provides an affirmative defense...

How widely used are Rule 10b5-1 trading plans? Is information about their use available?

A review of SEC filings and surveys shows an increase in the use of Rule 10b5-1 plans. Looking at 10b5-1 plan trades reported on Form 4...

How long do Rule 10b5-1 trading plans last?

According to experts, most Rule 10b5-1 plans cover...

Can I make trades in company stock outside the Rule 10b5-1 plan?

Only a few companies actually require insiders to have 10b5-1 plans. However...

Can my company force me to use a Rule 10b5-1 trading plan? Can it prohibit me from using one?

Some companies' policies on insider trading actually require all...

Is it possible to violate insider-trading laws by terminating or modifying my Rule 10b5-1 trading plan?

A properly developed Rule 10b5-1 plan offers you an affirmative defense against charges of insider trading. However, it is possible to lose the protection of the rule by canceling or modifying the plan while...

Should I set up a Rule 10b5-1 trading plan to cover the stock I will sell or surrender to pay withholding taxes when my restricted stock vests?

Both Rule 10b5-1 and the broader use of restricted stock and RSUs are new, so practices and procedures are evolving. Companies are considering the widespread use of Rule 10b5-1 plans for this...

Can I sell my company stock through a blind trust, or another type of trust, as a defense against insider trading?

Using a blind trust goes beyond the protections of Rule 10b5-1 plans, yet has more restrictions. These are irrevocable grantor trusts with...

What will happen to my Rule 10b5-1 plan if I die?

Ordinarily, a 10b5-1 plan ends if you die. However...

When I sell stock under a Rule 10b5-1 plan, do I report the sale differently on Form 4?

Only transactions prompt the need for filings: the mere adoption of a 10b5-1 trading plan is...

Must I suspend my Rule 10b5-1 plan if my stock trade date occurs during a sudden blackout period?

If all the requirements for Rule 10b5-1 plans are met...

My company is private. Can I set up a Rule 10b5-1 trading plan now so that I may start selling after the IPO lockup period?

When you set up a Rule 10b5-1 trading plan, one of the key requirements is that you must not...

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