What Is a Rule 10b5-1 Trading Plan? Definition, How It Works, Examples

Rule 10b5-1 sits under Rule 10b-5, the general anti-fraud rule of the SEC, the US securities regulator. It says that trading “on the basis of” material nonpublic information means trading while aware of it. That is information the market does not have and a reasonable investor would consider important. The rule then gives an affirmative defense, a defense the trader raises and proves. It applies if the trade was made under a contract, instruction or written plan adopted before you knew the information, and you met the rule’s conditions. In that case, the trade was not “on the basis of” that information.

The plan has to fix the trades in one of three ways. It can state the amount, price and date. It can give a written formula or algorithm that sets them. Or it can hand the decisions to someone else, usually a broker, after which you have no further say in how, when or whether to trade. People call it a 10b5-1 trading plan, a Rule 10b5-1 plan or a 10b5-1 “program.” All three names describe the same instrument.

The defense is not automatic. You must enter the plan in good faith, and the plan cannot be part of a scheme to get around the rule. Since 2023, you must also act in good faith toward the plan for as long as it runs. Changing the amount, price or timing of trades counts as ending the plan and adopting a new one. That restarts the cooling-off period, the required wait before the first trade.

The purpose is to let people who almost always hold inside information still trade on a schedule. A chief financial officer (CFO) knows the quarter’s numbers weeks before the market does. Without a plan, she can trade only in the windows her company’s policy opens, and a sale just before bad news invites a lawsuit. With a plan adopted months earlier, her defense is already on paper.

• Directors and officersThey have the longest wait before the first trade and must sign a certification in the plan. The company discloses their plans every quarter.
• Employees with routine accessPeople in finance and legal, and teams working on products not yet announced. A plan gives them the same route, with a 30-day wait.
• Large holdersHolders of more than 10% of a registered class of shares report their trades on Form 4. A plan turns a sell-down into a schedule.
• The company itselfAn issuer, the company whose shares these are, can buy back its own shares through a plan. The SEC did not apply the cooling-off period or the limits on multiple plans to issuers.

The SEC adopted the amendments on December 14, 2022. For years, critics had said that insiders adopted plans the day before trading and canceled them when the news turned. The new rules took effect on February 27, 2023. Plans adopted before that date keep the old defense unless they are changed, the release says.

A single-trade plan sells or buys the whole amount it covers in one transaction: one block of shares, on one date or at one price. The SEC saw these plans as the easiest to abuse. Someone could adopt a plan, wait out a short delay and sell everything before the news. So a person other than the issuer can rely on the defense for only one single-trade plan in any 12-month period.

What counts is the design. A plan built to sell everything at once is a single-trade plan even if the broker fills the order in pieces. If you expect to sell more than once a year, build one plan with several tranches, meaning separate sales on set dates. A series of one-off plans runs into the limit.

Before the initial public offering (IPO), there is no public market and no 10b5-1 question. On listing day the picture changes. Employees, founders and early investors suddenly hold shares with a market price. They also face a lock-up, a contract that stops them from selling for a period. After that, an insider trading policy limits when they may trade. For a holder, the difference between pre-IPO and IPO is mostly this change of rules.

A director’s or officer’s plan cannot trade for at least 90 days after adoption. So a plan adopted early in the lock-up can be ready to start close to the day the lock-up ends. Whether a plan may be adopted during the lock-up depends on the lock-up agreement and the company’s policy. The rule itself does not settle it.

If you held the company before it listed, including through a special purpose vehicle (SPV) that holds one investment, the plan matters from the other side. Insider sales add supply after the lock-up. The Form 4 checkbox and the quarterly 10-Q and 10-K disclosures tell you whether a sale was scheduled months ago or decided last week. A sale scheduled in advance says much less about the company than one an insider chose to make that week.

Two people work at a company that listed earlier in 2026 and uses the calendar year as its fiscal year. Both adopt plans on Tuesday, November 10, 2026. One is the chief financial officer. The other is a senior engineer who is not an officer. Each plan sells 40,000 shares in four monthly tranches of 10,000, subject to a minimum price.

Suppose the CFO decides in January to raise the minimum price. That is a modification. The old plan is treated as ended, a new one is adopted on the day of the change, and the 90-to-120-day clock starts again. The engineer’s plan would restart its 30 days in the same way.

• Adopting while awareThe plan protects you only if you held no material nonpublic information on the day you adopted it. Adopting it the week before earnings defeats the point.
• Tweaking the termsAny change to amount, price or timing creates a new plan with a new cooling-off period. Small adjustments can add up to months without trading.
• Running two plansA second open-market plan that overlaps the first can cost the defense for both. The exception is a plan set to start only after the first one ends.
• Canceling to time the newsEnding a plan ahead of good news and then trading outside it is exactly what the good-faith condition targets.
• Hedging around the planA hedge is a position that offsets price moves in the shares. If you hedge the same shares, a trade no longer counts as made “pursuant to” the plan.
• Forgetting the lock-upA plan does not override a lock-up agreement.

Material nonpublic information

Information about a company that the market does not have and that a reasonable investor would consider important. Examples are unreleased results, a pending deal or a failed trial.

Affirmative defense

A defense the trader must raise and prove. A 10b5-1 plan does not stop an investigation. It gives you a documented answer to one.

Cooling-off period

The wait between adopting a plan and its first trade: 90 to 120 days for directors and officers, 30 days for others.

Issuer

The company whose shares are traded. It can use a plan for buybacks, without the cooling-off period.

Section 16 officer

An officer as defined in SEC Rule 16a-1(f), broadly the executives who run the company. Officers, directors and holders of more than 10% report their trades on Form 4.

Single-trade plan

A plan designed to execute the whole amount it covers in one transaction. Only one per 12 months can rely on the defense.

Lock-up

A period after a listing during which existing holders agree by contract not to sell. The lock-up agreement sets it. The SEC does not.

Form 4

The SEC filing in which an insider reports a change in holdings. It is due by the end of the second business day after the trade and now carries a 10b5-1 checkbox.

Every rule was checked against the text of the regulation and the SEC’s adopting release. The last check was on October 1, 2026. This page describes US federal securities rules. A company’s own policy and any lock-up agreement can be stricter.