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10b5-1 trading plans

10b5-1 trading plans are agreements made to sell stock by a certain date to avoid being involved in insider trading, even if the person selling the stock is an officer of the company that is being traded and learns material non-public information due to become public after the trade.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.
After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade.


hmm. Is there a registry of how many of these 10b5-1 trading plans are currently active, vs those cancelled on a month by month basis?

gazspacho, the world needs you now. I really wish you were still alive.