If you are an employee with potential access to material company information, you are likely an “insider” and subject to trading restrictions. These restrictions typically limit insiders to trading in so-called open windows — pockets of time following the announcement of company earnings to the public. Insiders can sell company stock in these open windows only if they do not possess “insider information” — material information that has not been disclosed to the public at large. A 10b5-1 trading plan is a way for insiders to circumvent these restrictions and sell company stock throughout the year. Trading plans must be submitted for approval in an open window period and follow certain parameters set by the company. Benefits of a trading plan include:
- The ability to sell throughout the year, potentially capturing more price points (a positive when navigating market volatility);
- The flexibility to set different minimum (limit) prices and sequence the sale of different equity awards for optimal tax results;
- The ability to sell equity grants as they vest; and
- The potential to reduce the risk of paralysis as a result of insider information.
If you are an insider and in need of a 10b5-1 trading plan, you’ll want to work with an advisor with 10b5-1 plan expertise.