More corporate executives are using 10b5-1 plans to turn their risks into rewards with respect to trading company stock. Rule 10b5-1 plans allow corporate insiders to preclude trading liability and more easily access their personal wealth held in stock.

Background
Rule 10b5-1 prohibits the purchase or sale of a security on the basis of material nonpublic information in breach of a duty of trust or confidence. In simple terms, it limits an executive's ability to sell corporate stock based upon his or her frequent possession of insider information.

Benefits
Rule 10b5-1 Sales Plans effectively serve as a safe harbor from Rule 10b5-1 liability. These plans set forth a written contract for the sale of securities based upon a systematic plan or formula designed by an executive and his or her legal and financial advisors. With a Rule 10b5-1 Sales Plan in place, insiders have the ability to sell or buy stock pursuant to the written plan, even if they are in possession of material nonpublic information.

The plan is intended to:

• Alleviate concerns about violating insider trading laws
• Lessen pressure on the stock price when the traditional stock trading window opens
• Assist in the explanation of insider transactions and the reasons behind them to the public

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