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Rule 10b5-1

Tracking 10b5-1 Trading Plans

SEC Rule 10b5-1 is an important provision in insider trading regulation, as it allows insiders to trade securities over time without running afoul of prohibitions against trading when they’re aware of material non-public information (MNPI). Insiders can set up these pre-arranged trading plans with a broker or other outside agent at a time when they do not possess MNPI, as an affirmative defense against allegations of insider trading. This provides insiders the ability to have periodic trades made on their behalf, as long as the trades are made in their name by an independent party.

Recent Rule 10b5-1 Regulatory Amendments

In December 2022, the SEC adopted several amendments to its regulations regarding Rule 10b5-1 plan disclosures and activity. The following is a non-exhaustive list of the amendments to Rule 10b5-1:

  • A "cooling-off" period is required for officers and directors such that the first trade under a plan cannot happen within the 90 days following the plan adoption date. The cooling-off period for beneficial owners, who are not also officers or directors, is 30 days after plan adoption.
  • A restriction on concurrent Rule 10b5-1 plan adoptions; all insiders are restricted to one Rule 10b5-1 plan at a time.
  • Form 4s and 5s now feature a checkbox that marks trades on the form as pursuant to Rule 10b5-1.
  • All new Rule 10b5-1 plan adoptions, as well as plan modifications and terminations, by officers and directors must now be reported in an issuer's quarterly and annual filings.

These regulations are subject to change as the SEC adopts new amendments regarding plan disclosure and activity.

Helping Brokers and Traders Utilize Plan Data

As an investor, it's important to keep a close eye on insider trading to watch for interesting investment signals. For example, the CEO of a company you hold selling most of their stock would normally be a pessimistic signal. However, The Washington Service (WS) checks every trade to see if it was made pursuant to a 10b5-1 plan. The trade could just represent the CEO seeking compensation, rather than an indictment of the company’s future stock performance. 

As a broker working for clients that may be executives at public companies, it's important to note how insiders utilize 10b5-1 plans set up by their brokers to achieve their goals. EZ-Insider makes it simple to identify how insiders use 10b5-1 plans to dispose of their holdings without disrupting the market. It also gives brokers the ability to compare their client’s plans against similar individuals at other companies. WS also makes it easy to compile 10b5-1 plan information for marketing purposes.

The Washington Service Difference

WS tracks insiders' adoptions of Rule 10b5-1 plans and transactions made under such plans, and has one of the most comprehensive databases of active and expired Rule 10b5-1 plans. In addition to flagging trades that are pursuant to a pre-arranged Rule 10b5-1 plan, subscribers to our Rule 10b5-1 Plan Explorer Add-On have the ability to search for newly-adopted plans or find sellers that lack a pre-arranged trading plan. WS also writes daily news stories disclosing plan adoptions, amendments, and terminations so you can follow Rule 10b5-1 activity at companies of interest.

Our Rule 10b5-1 data stands apart from all other sources in both accuracy and scope. While other data sources may present each filing as-is, WS utilizes human review and machine learning to correct trades erroneously marked as un-planned, or correct trades that correspond with a planned Form 144 that should be flagged as pursuant to Rule 10b5-1. To identify Rule 10b5-1 plans that otherwise might slip through the cracks, our analysts look at a wide universe of SEC filings: Form 4s, Form 144s, and periodic corporate filings (8-K, 10-K, 10-Q, etc). We go the extra mile to gather hard-to-collect plan dates and proposed plan information from filings under related entities/trusts, free text in corporate filings, and paper filings.

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