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. Misappropriation Theory

    A perspective that defines the act of stealing confidential information ...
  3. Material Insider Information

    Material information, about certain aspects of a company, that ...
  4. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
  5. Bullet Dodging

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

    The buying or selling of a security by someone who has access ...
RELATED FAQS
  1. 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 >>
  2. Is there any history of insider trading with Warren Buffett or Berkshire Hathaway?

    Berkshire Hathaway came under intense scrutiny in 2011 for possible insider trading prior its acquisition of the chemicals ... Read Full Answer >>
  3. What is the difference between a company's outstanding shares and its float?

    There are a variety of share counts related to company stocks that investors should understand in order to accurately assess ... Read Full Answer >>
  4. What are some CEO characteristics/behaviors that could lead to a drop in stock prices?

    Characteristics or behaviours exhibited by a CEO that could lead to a drop in stock prices include impropriety, the appearance ... Read Full Answer >>
  5. How do I find a good personal bankruptcy lawyer?

    While it is not necessary to hire an attorney to file bankruptcy, the rules that govern bankruptcy can be extremely complex, ... Read Full Answer >>
  6. What are unregistered securities or stocks?

    Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with ... 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

    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.
  7. Mutual Funds & ETFs

    How To Start a Hedge Fund In the United States

    A general overview of how to start a hedge fund firm in the United States, including complying with state and federal regulations.
  8. Mutual Funds & ETFs

    How To Start A Hedge Fund In The UK

    Starting a new hedge fund in the United Kingdom is more complex than in the United States. We discuss UK laws and regulations for starting a new hedge fund.
  9. Mutual Funds & ETFs

    How To Start A Hedge Fund In Canada

    Would-be hedge fund managers in Canada need to understand the laws and regulations that must be followed in order to start a fund in the country.
  10. Taxes

    Is It Smart To Get Dual Citizenship?

    Does it ever make sense to be a citizen of the U.S. and somewhere else? Yes, so you can work minus a visa – not so much, if you get drafted into the army.

You May Also Like

Hot Definitions
  1. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  2. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  3. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  4. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  5. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
  6. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
Trading Center