The following is not meant to be legal advice.
For those who do not know what 10b5-1 trading plans are, they are plans that allow public company directors and officers (usually Section 16 insiders) to sell stock of the companies that they serve systematically. They fall under Rule 10b5-1 promulgated by the SEC. These plans help insiders avoid never being able to sell shares of stock because of almost constant possession of material non-public
Information. The plans help insiders to diversify their personal portfolios. The plans also allow insiders to avoid selling their shares and then being subject to charges of violating criminal laws that prohibit trading on the basis of material non-public information.
With 10b5-1 trading plans, because sales are scheduled in advance of their execution date and the plans are put into place at a time when the insider holds no material, non-public information, the plans prevent insiders from using material, nonpublic information to time the sale of their shares. 10b5-1 trading plans offer the affirmative defense against insider trading.
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