10b5-1 Trading Plans Explained in Plain English
A Rule 10b5-1 plan is a written plan that lets a company insider set up future trades in advance, at a time when they have no material non-public information. Trades made under a valid plan give the insider a legal defense against insider trading claims, which is why many routine executive sales happen through these plans.
Key takeaways
- The SEC adopted Rule 10b5-1 in August 2000 and tightened it with amendments adopted in December 2022.
- Directors and officers must now wait a cooling-off period of at least 90 days, and up to 120 days, before trading under a new or changed plan.
- Since April 1, 2023, Form 4 has a checkbox showing whether a trade was made under a 10b5-1 plan.
- A sale under a plan was usually decided months earlier, so it says less about the insider’s current view.
How a 10b5-1 plan works
An insider who wants to sell shares regularly — for example to pay taxes or diversify — signs a plan with a broker that fixes the amounts, prices or dates of future trades, or a formula for them. After that, the trades happen without the insider deciding each one. If the plan was adopted in good faith when the insider was not aware of material non-public information, the trades have an “affirmative defense” against insider trading liability under Rule 10b-5.
What changed with the 2023 rules
The SEC’s amendments added conditions for the defense to apply:
| Rule | What it requires |
|---|---|
| Cooling-off for directors and officers | No trades until the later of 90 days after adopting or changing the plan, or two business days after the company reports results for that quarter — but no more than 120 days. |
| Cooling-off for others | 30 days (except the company itself). |
| Certification | Directors and officers must certify in the plan that they are not aware of material non-public information and are acting in good faith. |
| Overlapping plans | Limits on using more than one plan at the same time. |
| Single-trade plans | Only one single-trade plan in any 12-month period. |
| Good faith | Everyone using a plan must act in good faith for as long as the plan is in place. |
Swipe the table to see all columns.
How to spot a plan trade
- The Form 4 checkbox. For filings made on or after April 1, 2023, insiders must check a box when a reported trade was made under a plan intended to satisfy Rule 10b5-1(c). On InsiderHound this appears as 10b5-1 plan; when the box is not checked we show “Not reported”.
- The footnotes. Many filings also say in a footnote when the plan was adopted.
- The company’s reports. Companies must disclose in their quarterly and annual reports when directors and officers adopt or end a trading plan.
What a plan trade means for investors
A sale under a 10b5-1 plan was usually scheduled months before it happened, so it tells you little about what the insider thinks today. A purchase or sale made outside a plan is a fresh decision, which is why many investors give it more weight. Plans can also be cancelled, and the SEC has brought cases against insiders who misused them, so a plan is not proof that a trade was harmless.
Sources: SEC fact sheet: Rule 10b5-1 Insider Trading Arrangements and Related Disclosure; SEC final rule, Release No. 33-11138 (accessed November 9, 2026). Educational content, not investment or legal advice.