Rule 10b5-1

What is the 'Rule 10b5-1'

The rule 10B5-1 is a rule established by the Securities Exchange Commission (SEC) that allows insiders of publicly traded corporations to set up a trading plan for selling stocks they own. Rule 10b5-1 allows major holders to sell a predetermined number of shares at a predetermined time. 10b5-1 plans are used by many corporate executives in an attempt to avoid accusations of insider trading.

BREAKING DOWN 'Rule 10b5-1'

It is not uncommon to see a major holder sell some of his/her shares at regular intervals. For example, a director of XYZ Corporation may choose to sell 5,000 shares of stock on the second Wednesday of every month. To avoid conflict, 10b5-1 plans must be established when the individual is unaware of any material non-public information.

RELATED TERMS
  1. Share Purchase Rights

    A type of security that gives the holder the option, but not ...
  2. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
  3. Short-Swing Profit Rule

    A Securities & Exchange Commission regulation that requires ...
  4. Insider Trading

    The buying or selling of a security by someone who has access ...
  5. Insider Buying

    The purchase of shares of stock in a corporation by someone who ...
  6. Open-Market Transaction

    An order placed by an insider, after all appropriate documentation ...
Related Articles
  1. Options & Futures

    Insider Selling Isn't Always A Bad Sign

    Predated trades at regular intervals can instill confidence, not fear, for investors.
  2. Investing Basics

    Explaining Insider Trading

    While often associated with illegal activity, insider trading actually encompasses both illegal and legal trading of securities.
  3. Investing

    How The SEC Tracks Insider Trading

    We look at how the SEC tracks and tries to stop insider trading - a seemingly impossible task.
  4. Professionals

    Financial Planning: Process and Rules

    Financial Planning: Process and Rules
  5. Investing

    Buy Stock With Insiders: How To Track Insider Buying

    Insider buying can be a sign that a company's stock prices will soon rise. Here's how to keep track of insider buying on public databases and websites.
  6. Options & Futures

    Delving Into Insider Investments

    Keeping tabs on company executives can provide clues about where a stock is headed.
  7. Options & Futures

    When Insiders Buy, Should Investors Join Them?

    Insider tracking can inform your investment strategy, but it requires research and a level head. Find out what to look for.
  8. Professionals

    Excessive Trading and Insider Trading

    FINRA/NASAA Series 66 - Excessive Trading and Insider Trading. This section explains excessive and insider trading.
  9. Budgeting

    6. Insider Trading

    Companies provide distress signals long before they go under. Find out how to read them.
  10. Professionals

    Standard II-A: Material Nonpublic Information

    CFA Level 1 - Standard 2 Integrity of Capital Markets, Standard II-A: Material Nonpublic Information
RELATED FAQS
  1. What exactly is insider trading?

    An "insider" is any person who possesses at least one of the following: 1) access to valuable non-public information about ... Read Answer >>
  2. How often should I measure my company's key performance metrics (KPIs)?

    Learn the definition of illegal insider trading while reviewing the people who can be involved and the regulations and consequences ... Read Answer >>
  3. Can you accidentally engage in insider trading?

    Learn why it's possible to commit insider trading by accident, and why insider trading laws create logical inconsistencies ... Read Answer >>
  4. What kinds of restrictions does the SEC put on short selling?

    Learn about the rules and regulations on short selling enforced by the U.S. Securities and Exchange Commission, or SEC, including ... Read Answer >>
  5. What's the difference between insider trading and insider information?

    Learn about insider information and insider trading and the differences between the two; both involve nonpublic information ... Read Answer >>
  6. What is the difference between the rule of 70 and the rule of 72?

    Find out more about the rule of 70 and the rule of 72, what the two rules measure and the main difference between them. Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center