Rule 10b5-1 gives a person an affirmative defense to an insider-trading claim when a trading arrangement meets the rule's conditions. The rule does not approve a trade. It does not provide a general exemption from insider-trading law.
How a 10b5-1 plan works
A person can create a contract, instruction, or written plan for future trades. The arrangement can state the amount, price, and date. It can instead use a formula or give trade decisions to an independent person. The insider must not control later trade decisions.
The person must adopt the plan when not aware of material nonpublic information. The person must act in good faith when the plan starts and while it operates.
Cooling-off periods
A director or officer cannot rely on the defense until the later of two dates. The first date is 90 days after plan adoption. The second date is two business days after the issuer reports financial results for the fiscal quarter in which the plan was adopted. The maximum wait under this test is 120 days. Other persons have a 30-day cooling-off period.
Other conditions in the current rule
- Directors and officers must certify that they are not aware of material nonpublic information when they adopt or modify a plan.
- Limits apply to overlapping plans.
- Limits apply to single-trade plans.
- A change to the amount, price, or timing can count as the end of one plan and the adoption of a new plan.
- The person must act in good faith and must not try to influence the plan's execution.
What Form 4 shows
The current Form 4 has a checkbox for a transaction that was intended to satisfy Rule 10b5-1(c). The filer must also provide the plan adoption date in the explanation section. Older filings do not have this required checkbox.
What '10b5-1 Detected' means
The Insiders Post currently checks stored footnotes and remarks for the text '10b5-1.' A detected badge means that the text was present. It does not confirm that the plan met every condition. It also does not confirm that each row in a multi-row filing was part of the plan.
What 'Not 10b5-1 Detected' means
The detector did not find that text in the stored footnotes or remarks. This result does not prove that a trade was discretionary. Check the Form 4 checkbox, the explanation, all footnotes, and the original SEC filing.
How to review a plan trade
- Check the Form 4 Rule 10b5-1 checkbox.
- Find the plan adoption date in the explanation.
- Read the footnotes for plan changes or related transactions.
- Compare the sale with holdings after the transaction.
- Check whether the filing contains grants, exercises, or tax withholding in linked rows.
- Do not infer compliance or intent from the badge alone.
Why the 2022 SEC video needs context
The SEC video in the research set explains problems with the old rule and describes proposed changes. The SEC adopted final amendments in December 2022. The current requirements differ from some details in that video.
What this product does not do
The product does not test plan compliance. It does not rate a plan. It does not label a transaction as legal or illegal. The badge is filing context only.