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 Information

    A non-public fact regarding the plans or condition of a publicly ...
  4. Insider Trading

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

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

    A form of option granting in which the award of options is delayed ...
Related Articles
  1. What Investors Can Learn From Insider ...
    Markets

    What Investors Can Learn From Insider ...

  2. Defining Illegal Insider Trading
    Economics

    Defining Illegal Insider Trading

  3. When Insiders Buy, Should Investors ...
    Options & Futures

    When Insiders Buy, Should Investors ...

  4. Policing The Securities Market: An Overview ...
    Investing Basics

    Policing The Securities Market: An Overview ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center