Rule 10b5-1 trading plans
A Rule 10b5-1 plan is a written schedule an insider sets up in advance, telling a broker to buy or sell fixed amounts on fixed dates or prices. Trades made under a plan are reported on Form 4 with a checkbox, and because they were decided months earlier they say little about what the insider thinks today, which is why this site leaves them out of its default view.
In brief
- The plan must be set up when the insider has no important non-public information.
- Officers and directors must wait at least 90 days before the first trade.
- Form 4 has had a 10b5-1 checkbox since April 1, 2023.
- Most large, regular sales by executives are plan sales.
What is a 10b5-1 plan?
A 10b5-1 plan is an instruction given to a broker ahead of time: sell 5,000 shares on the first trading day of each month, for example, or sell 20,000 shares if the price reaches $80. Once it is in place the insider is not supposed to influence the trades.
The name comes from SEC Rule 10b5-1. Executives nearly always know something the public does not, which makes any sale open to suspicion. The rule offers a defence: if the plan was adopted in good faith at a time when the insider had no important non-public information, later trades under it are protected even if the insider learns something in between.
What limits apply to these plans?
The SEC tightened the rule with changes that took effect on February 27, 2023 (SEC fact sheet):
- A waiting period. An officer or director cannot trade under a new or changed plan until 90 days have passed, or two business days after the company's next quarterly results if that is later, up to a maximum of 120 days. Other people must wait 30 days.
- A certification. Officers and directors must state in writing that they hold no important non-public information when adopting the plan.
- No stacking. Overlapping plans are generally not allowed, and a plan covering a single trade can be used only once in twelve months.
- Disclosure. Forms 4 filed on or after April 1, 2023 have a box to tick when a trade was made under a plan.
How do I tell a plan trade from a discretionary one?
By the checkbox. On this site a row from a filing with the box ticked carries a "10b5-1 plan" flag. The trade map has a filter with two settings, "No 10b5-1 plans" (the default) and "With plans".
The box applies to the whole filing, not to each row, and it has only existed since 2023, so older filings mention plans in footnotes or not at all. Treat the flag as reliable when present and its absence in an old filing as unknown.
Why are plan trades left out by default?
Because of when the decision was made. A plan sale executed this week was decided at least 90 days ago, often a year or more. It tells you how the insider chose to cash out over time, not how they feel about the company now. Leaving plan trades out of the default view keeps the map closer to recent decisions.
That is a choice about emphasis, and you can undo it with one click. Plan sales are still real money leaving insiders' hands, and a plan can itself be informative: a new plan to sell a large share of a holding is a decision too, made on the day the plan was adopted.
Are 10b5-1 plans controversial?
They have been. Critics argued that the old rule let insiders adopt a plan and trade within days, or cancel a plan when the news turned out well, which defeated the purpose. The 2023 waiting periods and limits were the SEC's answer. Defenders point out that executives paid largely in stock need an orderly way to sell, and that a scheduled sale is fairer to the market than one timed by hand.
Questions and answers
What is a 10b5-1 plan?
A 10b5-1 plan is a written instruction an insider gives a broker in advance to trade fixed amounts on set dates or prices. It protects the insider from insider-trading claims if it was adopted in good faith without important non-public information.
Why does Spot the Money hide 10b5-1 trades by default?
Because a plan trade was decided at least 90 days earlier, so it says little about the insider's current view. The map's "With plans" setting brings them back.
How long is the cooling-off period for a 10b5-1 plan?
For officers and directors, at least 90 days, or two business days after the next quarterly results if later, up to 120 days. For other people, 30 days.
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