Rule 10b5-1

AAA

DEFINITION of 'Rule 10b5-1'

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.

INVESTOPEDIA EXPLAINS '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. SEC Form 10-K405

    A form used by the Securities and Exchange Commission (SEC) prior ...
  2. Insider

    A director or senior officer of a company, as well as any person ...
  3. Insider Trading

    The buying or selling of a security by someone who has access ...
  4. Material Insider Information

    Material information, about certain aspects of a company, that ...
  5. Bullet Dodging

    A form of option granting in which the award of options is delayed ...
  6. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
RELATED FAQS
  1. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
  2. How can I profit from monitoring open interest?

    Since markets experience asymmetric information between parties, monitor whether there is an imbalance between the open interest ... Read Full Answer >>
  3. If I write a blog post about stocks I own, is that considered insider trading?

    Writing a blog post about stocks you own is not considered insider trading. The only duty of the blogger is to disclose he ... Read Full Answer >>
  4. Why is moral hazard so prevalent in the financial services industry?

    Moral hazard tends to be prevalent in the financial services industry due to the nature of the industry, temptation and greed, ... Read Full Answer >>
  5. Can you accidentally engage in insider trading?

    In 2011, an article appeared in the New York Daily News titled "Insider trading is not always high-profile or intentional; ... Read Full Answer >>
  6. In what context is a corporation considered to be an individual entity?

    In many legal contexts, corporations possess the rights and responsibilities and carry the liabilities of other individual ... Read Full Answer >>
Related Articles
  1. Markets

    What Investors Can Learn From Insider Trading

    Some insider trading is actually legal - and can be extremely telling for investors.
  2. Economics

    Defining Illegal Insider Trading

    The better you understand why insider trading can be criminal, the better you'll understand how the market works.
  3. 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.
  4. Investing Basics

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  5. Options & Futures

    Can Insiders Help You Make Better Trades?

    Find out why the trading activity of owners and executives can be a valuable trade-confirmation tool.
  6. Investing Basics

    Is Your Broker Churning Your Account?

    Is your broker churning your account to generate fees? Here's how to know and what recourse you have.
  7. Personal Finance

    The Top 5 Most Unionized Industries

    Unions don't have the membership numbers that they once did, but they are still a vital part of several different important industries.
  8. Investing

    Why We Need Antitrust Laws

    A look at antitrust laws in the United States and the many anticompetitive practices they safeguard against.
  9. Trading Strategies

    IPO Flippers And The Companies Who Hate Them

    Learn how flipping activity affects an initial public offering.
  10. Taxes

    Gay Weddings Mean Big Business

    The coming boom in same sex marriages represents a money-making opportunity for anyone in the wedding industry.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!