SEC Rule 10b5-1

SEC Rule 10b5-1 allows officers, directors and other insiders of publicly traded companies to transact in their company shares at all times, not just during open trading windows. This gives corporate insiders expanded trading opportunities. If you are a corporate officer of a public company, a 10b5-1 plan may be appropriate for you. William Blair & Company can assist you with constructing and executing your 10b5-1 plan. Please contact us with any questions you may have.

Corporate officers who wish to sell shares in their company often are hampered by limited trading opportunities. Trading “windows” may be closed when material nonpublic information exists and trading could potentially violate insider-trading laws. SEC rule 10b5-1, which became effective October 23, 2000, offers an opportunity for issuers and their officers and directors to structure trading programs without running afoul of the insider trading prohibitions. It permits corporate insiders to execute securities transactions in many situations where previously they might not have, out of concern over potential insider trading liability. Importantly, SEC Regulation 10b5-1 allows greater opportunity for corporate insiders to sell their shares.

Trading plans can vary in terms of complexity (see examples). However, every plan must expressly specify the amount, price and date of the purchase or sale or provide a written formula or algorithm for determining amounts, prices and dates. Additionally, the individual entering into the plan must do so at a time when he/she is unaware of material, non-public information.

Dan Grant from William Blair & Company has extensive experience with SEC Rule 10b5-1, having structured 10b5-1 programs for a variety of public companies. Additionally, Dan has authored several articles on rule 10b5-1. Dan recently published a White Paper discussing 10b5-1. Please contact Dan with any questions you may have.

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