What is a 10b5-1 trading plan? How prearranged insider trades work

A 10b5-1 plan is a written arrangement that lets a corporate insider schedule future trades in their company's stock in advance. The plan fixes the amount, price, and timing of trades (or a formula that determines them), and then executes automatically, even if the insider later learns material non-public information.

The rule behind it, SEC Rule 10b5-1, was adopted in 2000. Its practical effect is that a large share of the executive sales you see on Form 4s are not day-of decisions. They are trades a plan put in motion months earlier.

Insiders almost always know something the public does not, which makes it legally risky for them to trade at all. Rule 10b5-1 offers a path through: if the insider adopts a qualifying plan in good faith at a moment when they are not aware of material non-public information, trades executed under that plan get an affirmative defense against insider trading claims.

The key word is defense. A 10b5-1 plan is not blanket immunity. If the plan was adopted while the insider had inside information, or the insider later influenced its execution, the defense can fail.

The amendments, adopted in December 2022 and phased in through 2023, were a direct response to research showing some plans were adopted or modified suspiciously close to market-moving news. The same rulemaking also moved bona fide gifts of stock onto Form 4's two-business-day clock.

Look for the checkbox near the top of the filing, above the transaction tables. When it is checked, the filing indicates the transaction was intended to satisfy the Rule 10b5-1(c) affirmative defense, and a footnote typically states the date the plan was adopted.

Compare that adoption date to the trade date. A sale executing 14 months into a long-running plan is routine mechanics. A plan adopted recently, followed quickly by trades once the cooling-off period lapsed, tells you the insider made an active scheduling decision not long ago. Both are legal; they simply carry different amounts of information.

The Greediness Score is built around discretionary structure: an insider choosing to spend personal cash on open-market shares (code P), in size, promptly filed, in their own name. A scheduled sale under a 10b5-1 plan is close to the opposite. The decision was made long before the trade date, so the trade itself says little about what the insider believes today.

That is why routine planned sales sit low on a reading-priority list, while unplanned open-market buys - which almost never happen through a plan - sit high. The plan framework mostly filters noise out of the sell side; the buy side remains where discretionary conviction shows up.

A checked box does not prove the plan was validly adopted, does not prove the insider had no inside information at adoption, and does not prove the sale is bearish or meaningless. An unchecked box does not prove conviction either; plenty of discretionary trades are taxes, diversification, or liquidity. The checkbox is one structured field to weigh, not a verdict, and none of it forecasts returns.

When a filing crosses your feed: check whether the 10b5-1 box is checked, read the footnote for the adoption date, separate scheduled sales from discretionary trades, and give your attention to the open-market buys that no plan required anyone to make.

Greedy Insider does the sorting for you by scoring every Form 4's structure from 0 to 100. Start with the filings where discretionary conviction is highest: open the live feed filtered to the Strong band at /app?band=strong and work down from there.