Quick answer
What is a Rule 10b5-1 trading plan?
A Rule 10b5-1 plan is a written plan to buy or sell company stock that you adopt while not aware of material nonpublic information. Trades it executes get an affirmative defense against insider-trading claims, even during blackouts. Since 2023, directors and officers must wait a 90 to 120 day cooling-off period before the first trade.
Key takeaways
- 01Adopt the plan while clean of MNPI and act in good faith for its whole life.
- 02Directors and officers wait 90 to 120 days; other employees wait 30 days.
- 03Overlapping plans and repeated single-trade plans lose the defense.
- 04A plan spreads sales over time; it does not lower the tax on them.
| Cooling-off (directors and officers) | Later of 90 days or 2 business days after the 10-Q/10-K, max 120 days |
|---|---|
| Cooling-off (others) | 30 days |
| Single-trade plans | One per 12 months |
| Overlapping plans | Generally not allowed |
| D&O certification | Required at adoption |
| Disclosure | Item 408(a) quarterly; Form 4 checkbox |
The Basics
What is a Rule 10b5-1 trading plan?
A Rule 10b5-1 plan is a written contract, instruction or plan to buy or sell company stock. You adopt it while you're not aware of material nonpublic information. Once adopted, it gives you an affirmative defense to insider-trading claims for trades it executes, even if you later learn MNPI. Since 2023, directors and officers face a 90–120 day cooling-off period.
This is one lane in our Executive Concentrated Stock & Insider Selling Guide. The plan must set the amount, price and date (or a formula for them), or hand discretion to a broker who has no MNPI. You can't influence trades after adoption. Plans often sit alongside Rule 144 conditions for affiliates.
"A 10b5-1 plan is a defense you build in advance, while you have no MNPI. It is not a permission slip you grab later."
The 2023 Amendments
What changed in the 10b5-1 amendments?
The SEC adopted the amendments in December 2022 (Release 33-11138). They took effect on February 27, 2023, and they apply to plans adopted or modified from then on.
| Condition | Directors & officers | Other persons (non-issuer) |
|---|---|---|
| Cooling-off period | Later of 90 days after adoption, or 2 business days after the 10-Q/10-K for the adoption quarter; capped at 120 days | 30 days |
| Certification in the plan | Required: not aware of MNPI; adopting in good faith | Not required |
| Overlapping plans | Generally barred (limited exceptions, e.g. sell-to-cover, back-to-back plans) | Same |
| Single-trade plans | One per rolling 12 months | Same |
| Good-faith condition | Must act in good faith throughout the plan | Same |
| Form 4/5 checkbox | Flag trades made under a 10b5-1 plan | n/a |
Chart
Cooling-off period before the first trade
Modifications restart the clock: Changing the amount, price or timing of trades counts as terminating the old plan and adopting a new one. A modification triggers a fresh cooling-off period.
Sell-Down Math
How do you build a 10b5-1 sell-down schedule?
Most executives use a plan to sell evenly over time. Here is the arithmetic for a level schedule.
Calculator
Your 10b5-1 sell-down schedule
Enter shares to sell, the number of quarterly tranches and a reference price.
Shares per tranche
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Gross proceeds per tranche
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Plan length
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Illustrative only; not legal or tax advice. Add 90–120 days of cooling-off before the first tranche if you are a director or officer. For affiliates, check each tranche against the Rule 144 volume limit.
Chart
Shares still held: 100,000 sold over 8 quarters
Disclosure
What do companies have to disclose?
Under Regulation S-K Item 408(a), companies disclose each quarter (in the 10-Q, and in the 10-K for Q4) when a director or officer adopted or terminated a 10b5-1 plan or a non-Rule 10b5-1 trading arrangement. The disclosure covers the name, title, dates, duration and aggregate shares, but not the price. Item 408(b) requires annual disclosure of the company's insider-trading policies, and the policy itself is filed as an exhibit.
Adopt only in an open window, after confirming you have no MNPI
Include the D&O certifications in the plan document
Run one plan at a time; keep any single-trade plan to one per 12 months
Avoid modifying the plan, because each modification restarts the cooling-off period
Make sure every trade is flagged on Form 4
Expect your plan to be disclosed in the company's 10-Q
Where Embark fits
Your plan schedules the sale. What if the stock paid you instead?
A 10b5-1 sell-down realizes gains every quarter. Enter your shares and see the targeted income on the whole position.
- No sell-down tranches, and no capital gains at contribution
- Targets 10%+ annual income on the full position, not just what's left
- Keep the upside a sell-down gives away; clear it with counsel first
Run the numbers
Live prices · takes under a minute · no obligation
Pitfalls
Where do 10b5-1 plans still go wrong?
Do
- Adopt right after earnings
- Use price limits sparingly and set them in advance
- Coordinate the plan with Rule 144 volume and Form 144 timing
- Model the tax across each year of the plan
Don't
- Don't terminate a plan because of good or bad news, which undermines good faith
- Don't layer a hedge on top that changes your economic exposure
- Don't assume the plan shields 16(b) matching; outside narrow exemptions it doesn't
- Don't treat a plan as a tax strategy
A plan also doesn't exempt you from Section 16(b) short-swing liability, and trades still have to match the company's hedging and pledging policy.
Where Embark Fits
Can you diversify without selling at all?
Every route above ends in a sale, and a sale of low-basis stock triggers capital gains. Embark takes a different route. You contribute concentrated stock in kind to an SPV structured as a partnership. Under Section 721 mechanics there is $0 tax at contribution. The SPV targets 10%+ annual income on the position and you keep the upside. It is open to accredited investors only, and the income is targeted, not guaranteed, and contributed shares have a 3-year lock-up.
Insiders: clear it first: Contributing shares to an SPV is a disposition of your company stock. For a director, officer or 10% holder it may be reportable on Form 4, may need to fit inside an open trading window or pre-clearance, and may interact with Rule 144 and your company's hedging and pledging policy. Clear any Embark contribution with your own securities counsel and your company's general counsel before you act.
Embark is not the only tool. Compare it fairly with exchange funds, a zero-cost collar and a prepaid variable forward. Each one has its own insider-policy issues.
FAQ
10b5-1 plans: common questions
How long is the 10b5-1 cooling-off period?
For directors and officers it is the later of 90 days after adoption or two business days after the 10-Q or 10-K covering the adoption quarter, capped at 120 days. For other non-issuer persons it is 30 days.
Can I have two 10b5-1 plans?
Generally no. The 2023 amendments removed the affirmative defense for most overlapping plans. Narrow exceptions exist, such as sell-to-cover arrangements and a later plan that starts only after the earlier one ends.
Can I trade during a blackout under a 10b5-1 plan?
Yes. Trades under a properly adopted plan can execute during blackout periods. That is a main reason executives use plans.
Do I need to disclose my 10b5-1 plan?
Your company discloses adoptions and terminations by directors and officers under Item 408(a), and your Form 4 flags trades made under a plan.
Does a 10b5-1 plan avoid capital gains tax?
No. Each sale is taxed normally. A plan only spreads the timing.
Can I change my 10b5-1 plan?
Changing the amount, price or timing of trades counts as terminating the old plan and adopting a new one, which restarts the cooling-off period.
What do directors and officers certify at adoption?
That they are not aware of MNPI and are adopting the plan in good faith, not as part of a scheme to evade the rules.
Is Embark a way around insider trading rules?
No. An in-kind contribution is still a transfer of your shares, so company policy, trading windows, Rule 144 and Section 16 reporting can all apply. Clear it with your general counsel first.
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Primary sources
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Cite this article
Embark Funds Research. “Rule 10b5-1 Trading Plans Cooling-Off, Limits & Sell-Down Math.” Embark Funds, updated October 15, 2026. https://www.embarkfunds.com/insights/rule-10b5-1-trading-plan-guide
Not tax, legal or securities advice: This article is educational. Charitable, securities and tax rules depend on your facts and your company's policies. Work with a CPA, an estate attorney and, for insiders, securities counsel before acting. Embark income figures are targets, not guarantees, and contributed shares have a 3-year lock-up.
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Turn a Sell-Down Into an Income Stream
Each 10b5-1 trade realizes capital gains. Embark's SPV takes concentrated stock in kind with $0 tax at contribution, targets 10%+ annual income and keeps your upside. Accredited investors only. Clear it with your GC.