Equity Compensation · 14 min read
Rule 10b5-1 Plans for Employees, Not Just Executives
A Rule 10b5-1 plan is a written, pre-set schedule for selling company stock, adopted when you hold no material nonpublic information, that a broker then carries out. Since the SEC’s 2022 amendments, employees who are not directors or officers face a 30-day cooling-off period, no certification and no public disclosure, while insiders wait 90 to 120 days. No employee is required to have one, but many use a plan to sell through closed trading windows and staged lockup releases.
Rule 10b5-1 plans were designed with executives in mind, and most guides still speak to them. But the SEC’s 2022 amendments wrote a separate, lighter set of conditions for everyone who is not a director or officer, and public companies now file their trading policies, so an engineer at a newly public company can read exactly what a plan would and would not let them do. This guide covers the rule, the 2022 changes, what four large employers add on top, how a plan interacts with an IPO lockup, and a setup checklist. Nothing here recommends buying, selling or holding any company’s stock.
What is a Rule 10b5-1 plan?
A Rule 10b5-1 plan is a written instruction to a broker, adopted at a time when you have no material nonpublic information, that fixes in advance what will be sold, when, and at what price, or supplies a formula that does. Rule 10b-5 prohibits trading on material nonpublic information. Rule 10b5-1(c) provides an affirmative defense: a sale made under a qualifying plan is not treated as a trade “on the basis of” that information, even if you learn something later, so long as the plan’s conditions are met and you do not afterward influence the amount, price or timing (17 CFR §240.10b5-1(c)).
The plan does the deciding; the broker does the selling. That is the whole idea. It is not required by law for anyone, it does not make you an insider, and it protects only the trades made through it.
What did the SEC change in 2022?
On December 14, 2022 the SEC adopted Release No. 33-11138, effective February 27, 2023, adding conditions to the affirmative defense and new disclosure requirements (SEC press release 2022-222, December 14, 2022). The conditions differ by who you are:
| Condition | Directors and officers | Everyone else |
|---|---|---|
| Cooling-off before the first trade | The later of 90 days after adoption or two business days after the 10-Q or 10-K for the quarter in which the plan was adopted, capped at 120 days | 30 days after adoption |
| Certification in the plan | Must certify that they are not aware of material nonpublic information and are adopting the plan in good faith | Not required |
| Good faith | The plan must be entered into in good faith, and the person must act in good faith with respect to it | Same |
| Overlapping plans | No other open-market plan outstanding, with three exceptions (below) | Same |
| Single-trade plans | A plan designed to sell everything in one trade may be adopted only once in any 12-month period | Same |
| Changing the plan | Any change to amount, price or timing is a termination and the adoption of a new plan, with a new cooling-off period | Same |
| Disclosure | Quarterly disclosure of plan adoptions and terminations; a Form 4 checkbox on each trade | None |
The three overlap exceptions matter for employees. A series of contracts with different brokers can count as one plan if together they meet the rule. A second plan may be adopted so long as it does not begin trading until the first has finished. And a plan that only sells enough shares to cover withholding tax on vesting awards, with no control over timing, is not counted at all (17 CFR §240.10b5-1(c)(1)(ii)(D) and (E)). The disclosure rules sit in Item 408 of Regulation S-K: directors and officers report plan adoptions and terminations each quarter, and every company must say whether it has an insider trading policy and file it as an exhibit to the Form 10-K (17 CFR §229.408). That exhibit, numbered 19, is why the company table below can cite primary documents.
Does an employee who is not an officer need one?
No. The rule imposes no duty to have a plan, and most employees sell in open windows without one. Many use one anyway, for four reasons.
- Trading windows are short. At Nvidia the window closes five weeks before each fiscal quarter ends and reopens on the second trading day after results, which leaves roughly eight weeks per quarter to trade. Trades under a plan already in effect may execute while the window is closed (Nvidia insider trading policy, Ex. 19.1).
- Rank-and-file employees carry nonpublic information too. An engineer on an unreleased product, a finance analyst before the close, or anyone in a launch meeting can be exposed at the moment they want to sell. A plan adopted in a clean window removes the question.
- Lockup releases arrive on their own schedule. A staged lockup can release shares in the middle of a closed window. A plan set during the lockup, where the company permits, can sell on the release date without a window decision.
- The decision is made once. A written schedule replaces a recurring argument with yourself about the price.
The costs are real as well. A plan is rigid: reacting to news means terminating or modifying it, with the consequences in the table. The cooling-off period delays the first sale by a month or more, brokers charge for the plan, company approval may come with a required broker, and a plan protects no trade made outside it.
What do employer policies add?
The rule is the floor. Each company’s insider trading policy adds its own window, pre-clearance and plan rules, and since 2023 those policies are filed with the 10-K. Four examples, drawn from the filed exhibits. Company names identify the policies discussed and imply no affiliation.
| Company (policy date) | Trading window | Pre-clearance | Rule 10b5-1 plans | Hedging and pledging |
|---|---|---|---|---|
| Nvidia (updated October 31, 2025) (Nvidia Ex. 19.1) | Closed from five weeks before fiscal quarter-end until the second trading day after results; covers employees, directors, contractors and consultants | Section 16 directors and officers pre-clear with Corporate Legal | Permitted under separate Rule 10b5-1 Trading Plan Guidelines; trades under a plan in effect may execute during a closed window or while the person has nonpublic information | Derivatives, hedging, short sales, margin purchases and pledging prohibited |
| Apple (updated September 2024) (Apple Ex. 19.1) | Blackout from December 1, March 1, June 1 and September 1 until about 24 hours after results | Designated Individuals (the board, executive officers and others named) pre-clear at least two business days ahead | Plans pre-approved by Corporate Legal; cooling-off for Section 16 insiders as in the rule and, for everyone else, the later of 30 days or 24 hours after the next results; modifications only in an open window; one plan at a time | Short sales, hedging and derivatives prohibited for all; pledging prohibited for directors and executive officers |
| Alphabet (Exhibit to the 2024 10-K) (Alphabet Ex. 19.1) | Opens the second trading day after results; closes at the close of the first trading day of the quarter’s third month for Level 8 and above, or of the next fiscal quarter for Level 7 and below | The board and Section 16 officers pre-clear with the Insider Trading Compliance Officer | The company runs an Employee Trading Plan program under its 10b5-1 Trading Plan Guidelines | Short-term trading, short sales, hedging, derivatives, pledging, margin accounts, and limit or stop orders prohibited; the policy applies until a person has left and holds no nonpublic information |
| Meta (policy amended September 5, 2024; plan guidelines amended September 7, 2023) (Meta Ex. 19.1) | Closed from market close on the last day of the quarter’s middle month until market open on the second full trading day after results; the company may add special closures | Restricted Persons (the board, Section 16 officers and designated others) pre-clear all trades; approval lasts five trading days | 10b5-1 Designated Persons must trade only through a plan, even in open windows; plans pre-approved by the Compliance Officer; cooling-off of 90 days for employees generally, and for directors and Section 16 officers the later of 90 days or two business days after the 10-K or 10-Q, capped at 120; adopted, modified or terminated only outside a closed period and without nonpublic information; maximum duration two years; the company may suspend or terminate a plan (Meta 10b5-1 Trading Plan Policy, Ex. 19.2) | Hedging prohibited, with the ban naming puts, calls, collars, forward sale contracts, equity swaps and exchange funds; short sales, margin accounts and pledging prohibited, with limited exceptions |
Three things stand out. A company can lengthen the cooling-off beyond the rule: Apple adds a 24-hours-after-results test for non-insiders, and Meta applies 90 days to employees generally, three times the SEC’s 30-day floor. A company can forbid terminating a plan in a closed period and cap a plan’s length, as Meta does, although the rule itself does neither. And an employee’s level can change the window, as at Alphabet. The rule is the minimum; the policy on file this year is what applies to you, and the plan administrator can tell you which version that is.
Can I adopt a plan during an IPO lockup?
Usually, yes, and the lockup agreement says so. The SpaceX prospectus permits “entry into or amendment of a written plan meeting the requirements of Rule 10b5-1,” if the company then permits it, provided none of the locked shares may be transferred under the plan until the applicable lockup period expires (SpaceX Form 424(b)(4) prospectus, Underwriting—Lock-up Agreements). The Cerebras prospectus makes each early release subject to the company’s insider trading compliance policy (Cerebras Form 424(b)(4) prospectus, Underwriters), which is the same point from the other direction: the plan, the lockup and the policy each have to allow the sale.
The useful consequence is that the rule’s cooling-off period can run while the lockup does. For an employee who is not an officer, a plan adopted on October 1 can trade from October 31. If the company’s schedule releases shares on October 9 and October 24, those releases are out of reach for that plan, but a release tied to third-quarter results, or the final release in December, is not. Our SpaceX lockup calendar lays out a real example of that arithmetic. Two cautions: a company that has just gone public may not have a plan program running before its first 10-K, so ask the administrator, and a plan adopted while you hold nonpublic information fails the rule’s first condition regardless of the lockup.
A hypothetical plan, worked through
The employee below is hypothetical, the company is unnamed, and the $40 share price is a placeholder held flat so the arithmetic is visible. It is not a forecast. A married couple files jointly with $250,000 of taxable income. One spouse, not an officer or director, holds 6,000 released shares from options exercised years ago at $5 a share, all long-term. Their window opens on November 2 after results, they hold no nonpublic information, and they adopt a plan that day.
| Plan term | Setting |
|---|---|
| Adopted | November 2, 2026, in an open window |
| Cooling-off ends | December 2, 2026 |
| Schedule | Sell 500 shares at the market on the 15th of each month, December 2026 through November 2027, or the next trading day |
| Lot instruction | Specific identification: the $5 option lot, oldest shares first |
| Term | Twelve months; unsold shares stay unsold when the plan expires |
Because the schedule is the same in every month, the plan sells 2,500 shares in December through April, most of them inside the company’s closed windows, which is the point. The tax follows the lots, not the plan (Rev. Proc. 2025-32, section 4.03):
| Twelve monthly sales | Amount |
|---|---|
| Proceeds: 6,000 shares at $40 | $240,000 |
| Basis: 6,000 shares at $5 | $30,000 |
| Long-term capital gain | $210,000 |
| Federal tax at 15% (taxable income stays under $613,700) | $31,500 |
| Net investment income tax at 3.8% (income above $250,000) | $7,980 |
| Total federal tax, about $3,290 per month of sales | $39,480 |
No tax is withheld on a stock sale, so the household covers it through estimated payments. Timely payments that reach 110% of last year’s tax, since their adjusted gross income exceeds $150,000, generally avoid the underpayment penalty (26 U.S.C. §6654(d)). Now suppose that in March they decide 500 a month is too slow and change the plan to 750. Under the rule that is a termination and a new plan: a fresh 30-day cooling-off period runs, the March and April sales do not happen, and at a company like Meta the change could not be made in a closed period at all. Frequent changes also weaken the good-faith condition on which the whole defense rests.
How do I set one up?
- Confirm the company permits plans for your level, and get its guidelines. Some companies require their designated broker, a minimum term, or approval by the legal team.
- Choose the broker. Often the stock plan administrator’s brokerage. Ask what the plan costs, how limit orders that do not fill are handled, and how the broker confirms each trade.
- Adopt in an open window, holding no nonpublic information. The date of adoption starts the cooling-off period and is the date the good-faith condition is judged against.
- Design the schedule. The term (six to twenty-four months is common), the amounts, the dates, market or limit orders, what happens if a limit is never reached, and whether the plan expires or renews. A fixed-percentage, price-band or need-based rule can each be written in.
- Specify the tax lots. Give the broker a lot-identification instruction at adoption. The default is often first-in, first-out, which may not be the lot you want, and note which short-term lots turn long-term during the plan’s term.
- Model the cash. Sales carry no withholding, so add estimated payments to the calendar, and decide in advance where proceeds go.
- Understand modification and termination. Any change to amount, price or timing is a new plan with a new cooling-off period. Termination is allowed but, if repeated, undermines good faith, and company policy may forbid it in a closed period.
- If you are a director or officer, plan for the quarterly Item 408 disclosure, the certification in the plan, and the Form 4 checkbox on each trade.
- Keep the file. The adoption date, the signed plan, the company’s approval and every confirmation. The affirmative defense is only as good as the record.
How we approach a plan in the household’s context
A trading plan is a delivery mechanism. The decision it carries out, how much of one company a household should hold and on what schedule, comes first, and that is the work we describe on equity compensation and concentrated stock. Executives with pre-clearance and disclosure obligations start from our page for executives and equity compensation; employees at a company with a dated lockup start from the calendar, as on our page for SpaceX employees. The tax side belongs in the plan design rather than after it, which is where planning capital gains after a liquidity event and our tax planning process come in.
What this does not mean
Nothing here recommends selling, holding or buying any company’s stock, and the hypothetical plan illustrates mechanics, not a template. A Rule 10b5-1 plan is an affirmative defense whose value depends on facts at adoption and good faith afterward; it does not override an employer’s policy, a lockup agreement or the securities laws. Company policies quoted here are the versions filed on the dates shown and are revised. Tax figures reflect 2026 federal law and a hypothetical household. Confirm securities questions with the company’s legal team or your own counsel, and tax questions with a CPA.
Frequently asked questions
Do I need to be an executive to use a Rule 10b5-1 plan?
No. The rule applies to any person, and the 2022 amendments set a lighter cooling-off period of 30 days for people who are not directors or officers, with no certification or public disclosure. Whether you may use one depends on your employer’s policy, which may limit plans to certain groups or run its own program, as Alphabet does.
How long is the cooling-off period for a regular employee?
Thirty days after the plan is adopted, under 17 CFR §240.10b5-1(c)(1)(ii)(B). Directors and officers wait the later of 90 days or two business days after the next 10-Q or 10-K, up to 120 days. A company may add to the rule: Apple also requires non-insiders to wait until 24 hours after the next earnings release, and Meta’s plan guidelines apply 90 days to employees generally.
Can a Rule 10b5-1 plan sell during a blackout period?
Generally yes, if the plan was adopted in an open window while you held no material nonpublic information and it meets the rule’s conditions. Nvidia’s policy, for instance, says trades under a plan already in effect may execute during a closed window. Check your own policy, because a company may require plans to be pre-approved.
Can I cancel a Rule 10b5-1 plan?
Yes. The rule does not prohibit termination, but any change to the amount, price or timing counts as a termination plus a new plan with a new cooling-off period, and repeated terminations can undermine the good-faith condition that the defense depends on. Some employers, Meta among them, prohibit adopting, modifying or terminating a plan during a closed period.
Can I have two Rule 10b5-1 plans at once?
Not for overlapping open-market trades, with three exceptions: contracts with several brokers that together form one plan, a second plan that does not begin trading until the first is finished, and a plan that only sells shares to cover withholding tax on vesting awards. A plan designed to sell everything in a single trade may be adopted once in any twelve months.
Can I set up a plan during my company’s IPO lockup?
Usually, if the company permits it. Standard lockup agreements, including SpaceX’s, allow entry into or amendment of a Rule 10b5-1 plan during the lockup, provided no locked shares are sold under it until the relevant release. The cooling-off period can run at the same time as the lockup, so a plan adopted a month or more before a release can trade on the release date, subject to the company’s trading policy.
Sources and further reading
- 17 CFR 240.10b5-1, trading on the basis of material nonpublic information in insider trading cases
- SEC Release No. 33-11138, Insider Trading Arrangements and Related Disclosures, adopted December 14, 2022
- SEC press release 2022-222, SEC Adopts Amendments to Modernize Rule 10b5-1 Insider Trading Plans
- 17 CFR 229.408, Item 408 of Regulation S-K, insider trading arrangements and policies
- NVIDIA Corporation, insider trading policy, Exhibit 19.1 to Form 10-K for fiscal 2026 (updated October 31, 2025)
- Apple Inc., insider trading policy, Exhibit 19.1 to Form 10-K for fiscal 2024 (updated September 2024)
- Alphabet Inc., insider trading policy, Exhibit 19.1 to Form 10-K for 2024
- Meta Platforms, Inc., insider trading policy, Exhibit 19.1 to Form 10-K for 2024 (amended September 5, 2024)
- Meta Platforms, Inc., 10b5-1 Trading Plan Policy, Exhibit 19.2 to Form 10-K for 2024 (amended September 7, 2023)
- Space Exploration Technologies Corp., Form 424(b)(4) prospectus dated June 11, 2026: Underwriting, Lock-up Agreements
- Cerebras Systems Inc., Form 424(b)(4) prospectus dated May 13, 2026: Underwriters, lock-up agreements and early releases
- Rev. Proc. 2025-32, 2026 rate tables and capital gains thresholds
- 26 U.S.C. 1411, net investment income tax
- 26 U.S.C. 6654, estimated tax safe harbors
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