Rule 10b5-1 plans: what they are and what an insider sale does and does not tell you

What the rule does

Insiders are barred from trading while aware of material nonpublic information. Rule 10b5-1 gives them a way to trade on a schedule anyway. Under paragraph (c) of the rule, a person who adopts a contract, instruction or written plan for trading before becoming aware of such information has an affirmative defense to a charge of trading on it, if the plan meets the rule's conditions. The point of the plan is that the decision on how much to sell, at what price or on what dates was fixed in advance, and the later trade follows the plan.

What the SEC changed in 2022 and 2023

The SEC adopted amendments in December 2022, effective on 27 February 2023 (Release 33-11138). The SEC's fact sheet lists the main changes:

• A cooling-off period. For directors and officers, trading under a new plan cannot begin until the later of 90 days after adoption or two business days after the company discloses its results for the quarter in which the plan was adopted, up to a maximum of 120 days. For people who are not the company, directors or officers, the period is 30 days. The rule text in 17 CFR 240.10b5-1 sets out both.
• Certification and good faith. Directors and officers must certify at adoption that they are not aware of material nonpublic information and are adopting the plan in good faith, and everyone must act in good faith with respect to the plan.
• Limits on overlapping and single-trade plans. Anyone other than the issuer is limited in using multiple overlapping plans, and may rely on the defense for only one single-trade plan in any consecutive 12-month period.
• Disclosure by companies. Companies must disclose each quarter whether directors and officers adopted or terminated such arrangements, under Item 408 of Regulation S-K.
• A box on Form 4. Form 4 and Form 5 filers indicate by checkbox that a transaction was intended to satisfy the rule's affirmative defense.

How to see a plan in the filings

Three places show it. First, the Form 4: the box at the top, and footnotes, since the form's instructions ask for the plan adoption date to be given in the explanation of responses. Second, the company's quarterly report, which lists plan adoptions by directors and officers. Third, a Form 144, which has a field for the plan adoption date when the seller relies on the rule.

A real example links the first two. A Form 4 filed by NVIDIA executive Ajay K. Puri on 23 January 2026 reports a sale of 200,000 shares on 21 January 2026 with the box ticked and a footnote saying the sale was made under a plan adopted on 19 September 2025. NVIDIA's quarterly report for the quarter ended 26 October 2025, under Item 5, lists the adoption of a plan by Ajay Puri, Executive Vice President, Worldwide Field Operations, on 9/19/2025, covering 1,000,000 shares to be sold, expiring 6/24/2026. The two filings can be checked against each other, and the sale in January was 124 days after adoption.

What the research says

Studies of insider trades do not support a one-line conclusion either way, so it helps to say what each found.

• The SEC's own investor bulletin says insiders may sell company securities for any number of reasons, including liquidity and diversification.
• A 2012 study in the Journal of Finance by Cohen, Malloy and Pomorski, Decoding Inside Information, sorted insider trades into routine ones, which follow a regular pattern, and opportunistic ones. It found routine trades carry essentially zero abnormal returns, while a strategy focused on the opportunistic trades earned 82 basis points a month in its sample.
• A 2001 study, Are Insider Trades Informative?, by Lakonishok and Lee found that the informativeness of insiders' activity came from purchases, while selling appeared to have no predictive ability. Its sample runs from 1975 to 1995, before Rule 10b5-1 existed.
• A 2009 study, SEC Rule 10b5-1 and Insiders' Strategic Trade, by Jagolinzer concluded that on average trading within the rule does not solely reflect uninformed diversification.
• A 2021 Stanford paper, Gaming the System, by Larcker and co-authors looked at plans with three features: a short cooling-off period, a single trade, and trading that starts before the next earnings announcement. It reported that planned trades with those features avoided losses and preceded declines, while planned trades without them did not appear to do so.

None of these studies covers trades after the 2023 changes, and each describes averages in a sample, not any one sale.

What this means for reading a sale

The evidence supports a narrower statement than "most sales mean little". It supports these:

1. A sale is not a statement about the company. Insiders sell for liquidity and diversification, and many sales are planned months ahead.
2. Purchases and sales are not equivalent. In the older research, the information was in purchases.
3. A planned sale is different from an unplanned one, and the checkbox, the footnote and the adoption date let you tell which one you are reading.
4. Planned sales differ among themselves: how long ago the plan was adopted, how many trades it covers, and when trading began are all in the filings.

None of this is a forecast. OQRO labels sales made under a plan when the filing says so, and never infers a plan that the filing does not state.