SECURITIES COMPLIANCE | 2026-09-28
SEC Rule 10b5-1 Trading Plans After the 2023 Amendments: What California Insiders and Issuers Must Know
A properly structured 10b5-1 plan is still the cleanest way for insiders to trade — but the SEC’s 2023 amendments added cooling-off periods, certifications, and disclosure that make sloppy plans a liability.
Corporate insiders — executives, directors, and the companies themselves — often possess material nonpublic information almost continuously, which makes routine stock sales legally fraught. SEC Rule 10b5-1 provides the answer: a written trading plan adopted in good faith, before the insider is aware
Insiders who want to sell company stock face a structural problem: they frequently know things the market does not. Rule 10b5-1 lets them trade anyway — safely — by committing in advance, while not aware of material nonpublic information (MNPI), to a fixed trading plan.
The Affirmative Defense — the Core of 10b5-1
Rule 10b5-1(c) provides an affirmative defense to insider-trading liability under Section 10(b) and Rule 10b-5 when a trade is made pursuant to a plan that was adopted in good faith, at a time when the person was not aware of material nonpublic information, and that either specifies the amount, price, and date of trades, or provides a formula or delegates the decisions to a third party who is not aware of MNPI. The insider must not later exercise influence over how, when, or whether trades are executed. The defense exists because the trading decision was locked in before the insider had the information in question.
What the 2023 Amendments Changed
Effective in 2023, the SEC amended Rule 10b5-1 to close perceived loopholes. The key conditions now include:
- Cooling-off periods. For directors and officers, no trading under a new or modified plan until the later of 90 days after adoption or two business days after disclosure of the issuer’s financial results for the quarter (capped at 120 days). For persons other than the issuer and its directors/officers, a 30-day cooling-off period applies.
- Director/officer certifications. At adoption, directors and officers must certify that they are not aware of MNPI and are adopting the plan in good faith.
- Good faith throughout. The plan must not only be entered into in good faith — the insider must act in good faith with respect to it for the life of the plan.
- Limits on overlapping and single-trade plans. Generally no overlapping plans for open-market trades, and a limit of one single-trade plan in any 12-month period.
- New disclosure. Issuers must disclose in periodic reports the adoption, modification, and termination of Rule 10b5-1 (and certain non-Rule-10b5-1) trading arrangements by directors and officers, and disclose their insider-trading policies.
Why Good Faith Now Carries Teeth
The amendments made explicit that the affirmative defense is lost if the insider does not act in good faith with respect to the plan. Canceling or modifying a plan around the release of MNPI, adopting a plan while sitting on undisclosed bad news, or using a single-trade plan to opportunistically time a sale can all undermine the defense — and can become the centerpiece of an SEC enforcement action or a shareholder suit. A plan is now judged on both its adoption and the insider’s conduct over its life.
Practical Steps for California Issuers and Insiders
- Adopt plans only during open trading windows and while genuinely unaware of MNPI, with the required certifications.
- Build in the mandatory cooling-off period before the first trade.
- Avoid overlapping plans and limit single-trade plans to one per 12 months.
- Treat modifications and cancellations as the equivalent of adopting a new plan — with a fresh cooling-off period.
- Coordinate with the issuer’s disclosure team so adoptions, modifications, and terminations are reported as required.
Frequently Asked Questions
Does a 10b5-1 plan guarantee no insider-trading liability?
No. It provides an affirmative defense if all conditions are met and the insider acts in good faith. A defective plan, or bad-faith conduct around it, forfeits the defense.
What is the cooling-off period for officers and directors?
The later of 90 days after adoption or two business days after disclosure of the quarter’s financial results, capped at 120 days.
Can I have more than one 10b5-1 plan?
Generally no overlapping plans for open-market trades, and only one single-trade plan in any 12-month period, subject to the rule’s exceptions.
Do companies have to disclose these plans now?
Yes. Issuers must disclose directors’ and officers’ adoption, modification, and termination of trading arrangements in periodic reports, and describe their insider-trading policies.
Related Securities & Governance Guides
Talk to a Securities Attorney About 10b5-1 Plans
A Rule 10b5-1 plan that meets the 2023 conditions protects insiders and issuers; a defective one is a liability. Trembach Law Firm advises California insiders and public companies on structuring and disclosing compliant trading plans. Call (818) 514-7680.
Contact Trembach Law Firm at (818) 514-7680 for a confidential consultation.
Trembach Law Firm | 27001 Agoura Road, Suite 350, Calabasas, CA 91301