SEC Rule 10b5-1

Rule 10b5-1 was created in October 2000 to permit officers and directors of public companies to adopt predetermined written plans for selling or purchasing specified amounts of stocks as long as the person adopting the plan is not in possession of material nonpublic information when the plan is adopted. Your William Blair & Company advisor can help prepare and execute a plan specifically designed for you.

10b5-1 plans are an affirmative defense to allegations of insider trading, and the party claiming the defense must demonstrate that the plan, contract, or instructions either: 

• Specified the amounts, prices, and dates for sales in question or
• Used a written formula or algorithm, or computer program, for determining the amounts, prices, and dates or
• Provided instruction to another person to execute purchases and sales without exercising any subsequent influence over how, when, or whether to effect the transaction.

Rule 10b5: Employment of Manipulative and Deceptive Practices

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange:

• To employ any device, scheme, or artifice to defraud
• To make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in the light of the circumstances under which they were made, not misleading, or
• To engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

Advantages of a 10b5-1 Plan

• Allow purchases and sales at a time in the future when the insider may or may not be aware of material nonpublic information.
• Provide greater clarity to corporate insiders concerning a means to plan and structure securities sales.
• Permit gradual diversification of investment portfolios at a predictable rate, spreading sales over time to reduce market effect.
• Spread sales over long periods of time and avoid the bunching of sales in "window" periods.

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Printable SEC Rule 10b5-1 Brochure (PDF)