Trading Windows & Blackout Periods
When Executives Can Actually Sell

What is a trading window?

A trading window is the period when a company's insider trading policy lets directors, officers and designated employees buy or sell company stock. It usually opens one to two trading days after quarterly earnings are released and closes a few weeks before the quarter ends. Outside it, you are in a blackout and generally cannot trade without a plan.

Windows are a company policy, not an SEC rule. The law prohibits trading while aware of material nonpublic information (MNPI); windows are how companies reduce the odds that insiders trade when MNPI is most likely, in the weeks before earnings. This article is part of our Executive Equity & Insider Selling guide; it pairs with Rule 10b5-1 trading plans, which are the main way to sell during blackouts.

How does the quarterly window cycle work?

Because the window opens only after earnings and closes before the next quarter ends, the usable period is often six to eight weeks per quarter. Holidays, an event blackout or a slow pre-clearance process can shrink it further.

How many open trading days do you really get?

Why can an open window still say no?

The legal test is whether you are aware of MNPI when you trade, not whether the window is open. Information is generally material if a reasonable investor would consider it important, for example an unannounced acquisition, a guidance change, a major customer loss or a cybersecurity incident. If you have it, you cannot trade even in an open window.

Most policies therefore require officers and directors to pre-clear every trade with the general counsel or a compliance officer. Pre-clearance is usually valid for a short period, often two to five business days. If the trade does not execute in that time, you ask again.

Section 16 officers have extra constraints, including the short-swing profit rule. See Section 16 and short-swing profits.

What triggers an event-specific blackout?

Companies can impose an ad hoc blackout on anyone who knows about a pending event, often without saying why. Being told 'do not trade' is itself confidential. Typical triggers include M&A talks, a securities offering, a restatement, a pending major contract or a material cybersecurity incident.

What is a SOX 306 pension blackout?

Section 306(a) of the Sarbanes-Oxley Act and the SEC's Regulation BTR bar directors and executive officers from trading company equity acquired in connection with their service during a pension plan blackout. That is a period of more than three consecutive business days in which at least 50% of participants in the company's individual account plans, such as the 401(k), cannot trade company stock in the plan, often during a recordkeeper change.

The company must notify affected directors and officers and the SEC. Profits from a prohibited trade can be recovered by the company. The rule exists so that executives cannot sell while rank-and-file employees are locked in.

How do executives sell despite short windows?

The main tool is a Rule 10b5-1 plan, adopted in an open window while free of MNPI, which then executes on its own schedule even during blackouts. Affiliates also follow Rule 144 volume limits. Hedging and pledging, if your policy permits them, are covered in executive hedging and pledging policies.

Embark contributes concentrated stock into an SPV in exchange for partnership interests, an in-kind contribution that is generally a nonrecognition event under IRC §721, so $0 tax is due at contribution. The SPV targets 10%+ annual income while you keep exposure to the upside. Accredited investors only; targets are not guarantees. Contributing shares to an SPV is still a disposition of company stock, so it must fit within an open window and pre-clearance, and Section 16 insiders still report it. For holders who cannot sell often, it can turn a position that only moves a few weeks per quarter into a targeted income stream. Compare it with exchange funds before deciding.

Trading window questions

When does the trading window usually open?
Typically one to two full trading days after the company releases quarterly earnings. Your policy sets the exact rule.

Can I trade during a blackout?
Generally only through a properly adopted Rule 10b5-1 plan or a narrow exception in your policy. Gifts may also be covered, so check first.

Does an open window mean I can trade?
No. You must not be aware of MNPI, and most policies require pre-clearance before each trade.

What is a SOX 306 blackout?
A ban on directors and executive officers trading company equity acquired through their service while 401(k) participants are locked out of trading for more than three consecutive business days.

Do blackouts apply to my spouse?
Most policies cover family members in your household and entities you control. Read your policy's definition of covered persons.

Are trading windows required by law?
No. They are company policy, built to reduce insider-trading risk. SOX 306 pension blackouts are the exception set by regulation.

Does my company have to disclose its insider trading policy?
Yes. Since the 2023 amendments, companies file their insider trading policies as an exhibit to the 10-K or explain why they have none.

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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