Set up your 10b5-1 plan before the first window. Not during it.

What a 10b5-1 plan actually is

A Rule 10b5-1 trading plan is a written contract — with your broker or entered into a brokerage platform — that specifies in advance how much you'll sell, at what price or on what schedule. Once adopted, trades execute automatically. You can't cancel or modify them based on information you later receive, which is the whole point.

The legal logic: insider trading rules prohibit selling while in possession of material nonpublic information (MNPI). If you pre-committed a sale before you knew anything, the later execution can't be "on the basis of" MNPI — the affirmative defense under 10b5-1(c). The plan must be adopted in good faith, at a time when you don't actually possess MNPI.

Who actually needs one

Not every employee does. Necessity depends on how much MNPI exposure you have and how likely you are to be inside a closed window when you want to sell:

• Officers and directors (Section 16 insiders): You're almost certainly a named executive officer, VP-level, or board member. You face mandatory quiet periods around earnings, deal activity, and other events. A 10b5-1 plan is the standard tool for managing this — it lets you sell on a pre-committed schedule regardless of what's happening at the company.
• Employees with frequent MNPI access: Finance, legal, IR, corp dev. If you regularly see unannounced deal flow, revenue data, or material contracts, you're often in informal "closed windows" even when not on the formal list. A plan reduces compliance risk.
• Other employees in open-window environments: If your company runs structured open/closed trading windows and you don't hold MNPI outside those windows, you may not need a plan — you can sell during open windows whenever you're clean. Ask your equity plan administrator what the policy says.

The decision about whether you need a 10b5-1 plan is a legal question specific to your role and your company's insider trading policy. General counsel or an equity attorney — not a financial advisor — is the right first call.

The 2022/2023 SEC amendments: what changed

The SEC adopted significant changes to Rule 10b5-1 in December 2022 (Release 33-11138), effective February 27, 2023.¹ If you've read about 10b5-1 plans from pre-2023 sources, those descriptions are outdated. The key changes:

Cooling-off periods (now mandatory)

These cooling-off periods apply to the initial adoption of a plan and to modifications — if you change the plan's price, quantity, or timing, the clock restarts. Modifications effectively count as a new plan adoption.

Single-trade plans: one per 12-month period

A "single-trade plan" sells everything in one transaction rather than on a schedule. Officers, directors, and employees are each limited to one single-trade plan per 12-month rolling window. This prevents the abuse of running a new plan before each anticipated transaction.

No overlapping plans (officers and directors)

Section 16 insiders generally cannot have two active 10b5-1 plans running simultaneously. Limited exceptions exist (such as a plan for one class of security and a plan for a different class, or a legacy plan being wound down) but the general rule is one plan at a time.

Good-faith certification

Officers and directors must represent in writing at adoption — and at each modification — that they (1) are not aware of material nonpublic information, and (2) are adopting the plan in good faith, not as part of a scheme to evade Rule 10b-5. This was always implied; the 2022 amendments made it an explicit written requirement.

How to set one up

1. Clear your compliance.. Review your company's insider trading policy before doing anything. Most companies require you to notify your general counsel or compliance officer before adopting a plan. Some have their own approved-plan templates. Skip this step and the plan may be disqualified.
2. Choose a broker or platform. Most major brokerages (Fidelity, Schwab, Morgan Stanley, E*Trade) have 10b5-1 plan programs. Equity plan platforms (Carta, Shareworks/Morgan Stanley Equity, E*Trade Stock Plan) often have streamlined setup. Your company's equity plan administrator can usually point you to the right channel.
3. Define the plan parameters. A valid plan must specify at least three things: (1) the amount of securities to trade, (2) the price (or a formula for the price), and (3) the timing (specific dates, a formula, or delegation to a broker with no discretion left to you). You can use limit prices, trailing conditions, or fixed schedules.
4. Sign and wait out the cooling-off. The clock starts at adoption. Your first trade can't execute until after the cooling-off period. Set a reminder; don't assume the broker will flag it.
5. Don't touch it. After adoption, you must treat the plan as binding. Any modification resets the clock. Any cancellation that's MNPI-influenced could void the affirmative defense retroactively — for the trade that already executed, not just future ones.

Design decisions that matter

The plan parameters you set at adoption determine your outcomes. Key choices:

Fixed price limit or market order?

A plan that executes only above a price floor (e.g., "sell 500 shares if SPCX trades above $150") gives you downside protection — but if the stock drops below your limit and stays there, the plan doesn't execute and your concentration doesn't change. A market-order-equivalent plan ("sell X shares on date Y at market") executes regardless of price. For employees trying to systematically diversify, the certainty of execution usually matters more than capturing the upside.

Quantity: percentage or fixed shares?

Percentage-of-holdings plans adapt to future vesting; fixed-share plans are simpler and more predictable. If you have significant unvested equity that will settle during the plan period, percentage-based parameters avoid selling more than intended.

Tranche timing: match your lockup windows

Design the plan so each tranche executes inside a corresponding lockup release window. If you're released in partial tranches — 20% in August, additional amounts through December — write the plan with execution instructions mapped to each window. Your broker can structure this.

SpaceX SPCX timing: a worked example

SpaceX IPO'd on June 12, 2026 (Nasdaq: SPCX). The reported staggered lockup schedule releases shares in tranches through ~December 2026. Here's how the cooling-off math works for SPCX employees adopting a plan in late June 2026:

SpaceX lock-up terms are based on publicly reported S-1 descriptions. Your actual eligible percentages, release dates, and plan requirements depend on your holder class and grant documents. Verify with your company's equity team before acting. This is not legal advice.

When you don't need a 10b5-1 plan

A regular employee at a company with standard quarterly open/closed trading windows — who doesn't hold MNPI outside those windows — can generally sell during open windows without a plan. If the window is open, you're clean, and you've confirmed you're not in possession of anything material, you can execute a sale. The main reasons to adopt a plan in this situation:

• You want a pre-committed, emotion-free schedule and won't trust yourself to execute in windows.
• Your company's window policy is restrictive enough that you routinely can't sell when you want to.
• You have a large concentrated position and want the protection of a documented compliance record.

If none of those apply, don't over-engineer it. Open-window selling with a pre-written glidepath (even just a spreadsheet you've committed to) can be just as effective for the diversification goal.

Common mistakes

• Adopting during a closed window. If you sign a 10b5-1 plan while you actually possess MNPI, the affirmative defense may not apply — even if trades don't execute until after the cooling-off period. Adoption must happen when you're genuinely clean.
• Setting price limits too aggressive. Employees who set floor prices well above market often end up with plans that never execute — the stock doesn't cooperate, the window closes, and they're back to an unplanned concentrated position.
• Canceling right before a bad earnings release. Cancellation itself can constitute insider trading if done while in possession of MNPI about an upcoming negative event. The SEC's enforcement focus since the 2022 amendments has explicitly targeted this pattern.
• Forgetting the plan continues. Brokers don't always send reminders when a tranche executes. If you've set it and forgotten it, you may be selling more than you intended — or less, if a limit isn't being hit — without knowing it. Build a review cadence.
• Treating modification as free. Changing the plan restarts the cooling-off period. If you modify shortly before a window opens because you changed your mind about the price, you may miss that window entirely.

Your cooling-off clock starts when you sign.

Get matched with a fee-only fiduciary who works post-IPO equity — glidepath design, tranche-by-tranche tax modeling, 10b5-1 coordination, and concentration management. Free, no obligation.