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Best Laid Plans Gone Awry: Practices for Rule 10b5-1 Trading Plans

Written by Sarah A. Good, Cindy V. Schlaefer, Brian M. Wong, Gabriella A. Lombardi and Laura C. Hurtado

Rule 10b5-1 trading plans are in the limelight due to investigations initiated by U.S. Attorney’s Offices and the SEC into possible abuses by corporate executives of such plans. Now, more than ever, companies and their boards of directors should review and strengthen their insider trading policies concerning Rule 10b5-1 trading plans.

Rule 10b5-1 trading plans are no stranger to controversy. First introduced in 2000 by the Securities and Exchange Commission (SEC), Rule 10b5-1 trading plans permit a corporate insider to adopt a plan of acquisition or disposition of his or her company’s stock when not in possession of material nonpublic information so that trades may be executed by a broker at predetermined times regardless of whether the insider then possesses material nonpublic information.

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