It is common for corporate executives to use a 10b5-1 plan to ensure adherence to insider trading laws and to avoid any chance of accusations of insider trading in US market.
A 10b5‐1 plan is a written plan for trading securities that is designed in accordance with Rule 10b5‐1 of the Securities Exchange Act of 1934 (the “Exchange Act”) in US, which allows insiders of a listed company to sell a pre-determined number of shares at a pre-determined time in accordance with insider trading laws.
In the trading plan, the price, trading amount, and sales dates must be specified in advance and determined by a formula or metrics. When making the sale plan, the seller must not have access to any material non-public information, e.g. during window-open period.
The following are a few key benefits of having a 10b5-1 plan:
