10b5-1 Plan Adoption Requirements: 2026 Practitioner Walkthrough

If you're a director, officer, or compliance officer at a public company, a Rule 10b5-1 plan is your primary tool for trading company stock without triggering insider trading liability. But the SEC's December 2022 amendments rewrote the adoption playbook in ways that still catch practitioners off guard in 2026. This walkthrough gives you the exact sequence of steps, the conditions that must be met at each stage, and the specific mistakes that void the affirmative defense.

For a deep dive into cooling-off period mechanics and worked examples, see our companion piece: 10b5-1 Plan Cooling-Off Period: 2026 Practitioner Walkthrough.

Key takeaway: A 10b5-1 plan adopted without satisfying every condition in amended Rule 10b5-1(c)(1) provides no affirmative defense. The SEC's 2022 overhaul added five new conditions on top of the original requirements. All five must be met at adoption and maintained throughout the plan's life.

What Are the Core 10b5-1 Plan Adoption Requirements?

A valid Rule 10b5-1 plan must satisfy both the original conditions and the five new conditions added by the 2022 amendments, effective February 27, 2023. The original rule, adopted in August 2000, required only that the plan be written, adopted without MNPI awareness, and structured so the insider could not subsequently influence trades. The amended rule layers on cooling-off periods, written certifications, overlapping-plan prohibitions, single-trade plan limits, and an expanded good-faith obligation.

Here is the complete checklist, organized by when each requirement must be satisfied.

Before You Adopt: Pre-Adoption Conditions

1. Confirm you are MNPI-free. The plan must be adopted at a time when you are not aware of any material nonpublic information about the issuer or its securities. This is not a formality. If you are aware of MNPI at adoption, the plan provides no defense, regardless of how well-drafted it is.
2. Check your company's insider trading policy. Most policies require plan adoption during an open trading window and pre-clearance from the general counsel or compliance officer. The SEC rules are a floor; company policy may be stricter. Coordinate with your insider trading blackout period policy before proceeding.
3. Audit existing plans. Under the overlapping-plan prohibition (discussed below), you generally cannot adopt a new qualifying plan while another is outstanding. Identify every existing 10b5-1 arrangement, including sell-to-cover instructions for RSU vesting, before adoption.
4. Check the 12-month single-trade plan window. If you used a single-trade plan in the past 12 months, you cannot rely on the affirmative defense for another one until that window closes.

At Adoption: What the Plan Document Must Contain

The plan itself must be a written document that specifies:

• The amount of securities to be purchased or sold (or a formula, algorithm, or computer program for determining the amount).
• The price at which trades will occur (or a formula).
• The date on which trades will occur (or a formula).
• Alternatively, instructions that give the broker or agent full discretion over how, when, and whether to execute, with no subsequent influence by the insider.

For directors and officers, the plan must also include written certifications at the time of adoption (or modification) stating:

1. The director or officer is not aware of any MNPI about the issuer or its securities.
2. The director or officer is adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5.

These certifications must appear in the plan document itself, not in a side letter or email. If your plan template predates February 27, 2023, check that the certification language has been added. Missing certifications are one of the most common documentation gaps compliance teams discover during plan reviews.

The Cooling-Off Period: When Can Trading Begin?

This is where most practitioners get tripped up. The cooling-off period is not simply "90 days." The correct calculation depends on who is adopting the plan.

Worked example: A CFO adopts a plan on March 1 (the first day of Q1). The company files its Q1 Form 10-Q on May 10. Ninety days from March 1 is May 30. Two business days after May 10 is May 14. The later date is May 30, so trading cannot begin until May 30. If the 10-Q had been filed on August 1 instead, two business days after would be August 5, which is more than 120 days from March 1 (June 29). The 120-day cap applies, and trading could begin June 29.

Modification resets the clock. Any change to the amount, price, or timing of trades under the plan, including changes to a related formula or algorithm, counts as a termination and re-adoption. A new full cooling-off period begins from the modification date. Administrative changes, such as substituting one broker for another to execute the same instructions, are generally not treated as modifications under 17 CFR § 240.10b5-1, but any change that touches trade parameters is.

For a full worked breakdown of the cooling-off mechanics, including the 120-day cap interaction and the two-business-day rule, see our dedicated walkthrough: 10b5-1 Plan Cooling-Off Period: 2026 Practitioner Walkthrough.

Can an Insider Have More Than One 10b5-1 Plan?

Generally, no. The 2022 amendments prohibit persons other than issuers from having more than one qualifying Rule 10b5-1 plan for open market purchases or sales of an issuer's securities at the same time.

There are three important carve-outs and one sequencing exception.

Carve-Outs from the Overlapping-Plan Prohibition

1. Transactions directly with the issuer. Plans for employee stock ownership plans (ESOPs) and dividend reinvestment plans (DRIPs) are excluded because they do not involve open market transactions. An insider can maintain an ESOP participation alongside a separate open-market 10b5-1 plan without triggering the prohibition.

2. Sell-to-cover plans for tax withholding. A plan that authorizes an agent to sell only enough securities to satisfy tax withholding obligations from the vesting of a compensatory award (a "sell-to-cover" plan) is exempt, provided the award holder cannot exercise control over the timing of those sales. This is the condition compliance teams most often misapply. The plan language must affirmatively remove the insider's ability to influence when the sales occur. If the insider retains any discretion over timing, the carve-out does not apply.

3. Multiple broker-dealers, one plan. A series of separate contracts with different broker-dealers to execute trades under a single Rule 10b5-1 plan is treated as one plan, not multiple overlapping plans. This matters for insiders who hold shares in accounts at different custodians.

Sequencing exception. An insider may maintain two separate plans if trading under the later-commencing plan is not authorized to begin until after all trades under the earlier plan are completed or expire without execution. If the first plan is terminated early, the first trade under the second plan must not occur until after the applicable cooling-off period following that termination.

How Many Single-Trade Plans Can an Insider Use?

One per 12-month period. A "single-trade plan" is a plan designed to effect the purchase or sale of the total amount of securities covered by the plan as a single transaction. Insiders other than issuers may rely on the affirmative defense for only one such plan in any consecutive 12-month period.

A plan is not treated as a single-trade plan if:

• It gives the agent discretion over whether to execute as a single transaction, or
• It provides that the agent's future acts will depend on events or data not known at adoption, and it is reasonably foreseeable that multiple trades might result.

Sell-to-cover plans are also exempt from the single-trade plan limit.

The practical implication: if you want flexibility for the broker to execute across multiple sessions, build that discretion into the plan language. A plan that instructs the broker to "sell 10,000 shares on October 15" is a single-trade plan. A plan that instructs the broker to "sell 10,000 shares at the broker's discretion between October 1 and December 31" is not.

What Does "Good Faith" Actually Require?

This is the most underappreciated requirement in the amended rule, and the one with the broadest ongoing exposure.

The original rule required that the plan be entered into in good faith. The 2022 amendments extended that obligation: the insider must also have acted in good faith with respect to the plan throughout its entire duration, not just at adoption.

The SEC's adopting release gives a concrete example of what violates this ongoing requirement: influencing the timing of an issuer's disclosure so that trades under the plan become more profitable. The Skadden analysis confirms this extends to any activity within the insider's control that directly or indirectly affects the issuer, its disclosures, or the market in a way that benefits the insider's plan trades.

Practical examples of post-adoption conduct that can void the defense:

• Lobbying internally to delay an earnings release so a planned sale occurs before bad news is public.
• Selectively accelerating a vesting event to move shares into a window covered by the plan.
• Cancelling or modifying the plan in a manner that benefits from MNPI, even if the cancellation itself is not a trade.

Key takeaway: Good faith is not a box you check at signing. It is an ongoing obligation that runs for the life of the plan. Post-adoption conduct that manipulates the information environment around the plan's trades can strip the affirmative defense retroactively.

What Are the Disclosure Obligations for Insiders and Issuers?

The 2022 amendments created a parallel set of disclosure obligations that compliance teams must track separately from the plan adoption conditions.

Section 16 Insiders: Form 4 and Form 5

For reports filed on or after April 1, 2023, Section 16 reporting persons must:

• Check the Rule 10b5-1 checkbox on Form 4 or Form 5 for any transaction intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).
• Disclose the date of plan adoption on the form.

Failing to check the box, or disclosing the wrong adoption date, does not by itself void the affirmative defense, but it creates a public record inconsistency that the SEC can use in an enforcement inquiry. It also signals to market participants that the transaction may not have been pre-planned. For a full breakdown of Form 4 transaction codes and the checkbox mechanics, see Form 4 Transaction Code P vs S vs A: What Each Actually Means.

One additional change that catches teams off guard: bona fide gifts of securities, previously reportable on Form 5, must now be reported on Form 4 under the amended rules.

Issuer Quarterly and Annual Disclosures

Issuers must include disclosures about director and officer Rule 10b5-1 plan activity in their Forms 10-Q, 10-K, and 20-F, and in proxy or information statements. These disclosures must cover:

• The names and titles of insiders who adopted, modified, or terminated a plan during the quarter.
• Plan adoption, modification, and termination dates.
• The aggregate number of securities covered.

The compliance deadline for most issuers was the first full fiscal period beginning on or after April 1, 2023. Smaller reporting companies received a six-month deferral, making their effective deadline the first full fiscal period beginning on or after October 1, 2023.

Option Grant Timing Disclosure

The final rules also require issuers to disclose their policies and practices around the timing of option grants relative to the release of MNPI. A new table must report any option awards granted in the window beginning four business days before the filing of a periodic report or a material Form 8-K and ending one business day after that triggering event. This "spring-loading" disclosure is designed to surface whether compensation committees are timing grants to benefit from anticipated price movements after MNPI becomes public.

What Happened to Plans Adopted Before February 27, 2023?

Pre-existing plans were not automatically invalidated. The SEC's adopting release confirmed that the amendments do not affect the affirmative defense available under a plan entered into before the effective date, as long as the plan is not subsequently modified. Any modification to the amount, price, or timing of trades after February 27, 2023 is treated as a termination and re-adoption, requiring full compliance with the amended rule.

The practical consequence: an insider who kept a pre-amendment plan in place without changes retained the original affirmative defense. But anyone who tweaked a legacy plan after February 27, 2023 needed to comply with all five new conditions from that point forward, including the cooling-off period and written certifications.

Issuers vs. Insiders: A Critical Distinction

The cooling-off period, overlapping-plan prohibition, and single-trade plan limit do not apply to issuers' own share repurchase programs under the 10b5-1 amendments. The SEC explicitly declined to impose these conditions on issuer repurchase plans in the 2022 rulemaking, noting it was still considering whether they were warranted. Issuers and insiders operate under materially different frameworks, and conflating them is a common source of compliance error.

Adoption Checklist: The Full Sequence

Use this sequence every time a director, officer, or other insider adopts a new plan.

Before adoption:

• Confirm no MNPI awareness (document the confirmation in writing).
• Confirm the company's trading window is open and pre-clearance obtained.
• Identify and terminate or account for any existing qualifying plans.
• Verify no single-trade plan was used in the prior 12 months (if this will be a single-trade plan).
• Confirm the sell-to-cover carve-out applies if maintaining an existing RSU withholding instruction.

At adoption:

• Plan is in writing and specifies amount, price, and date (or a formula/algorithm, or full broker discretion).
• For directors and officers: written certifications included in the plan document (no MNPI, good faith, no evasion scheme).
• Plan adopted during an open trading window per company policy.
• Cooling-off period calculated and documented: for directors/officers, the later of 90 days or two business days after the next 10-Q/10-K, capped at 120 days; for other persons, 30 days.
• First permitted trade date confirmed and communicated to the broker.

After adoption:

• No post-adoption influence over trade timing, pricing, or execution.
• No lobbying for delayed or accelerated disclosure that would benefit plan trades.
• Any modification assessed: does it change amount, price, or timing? If yes, treat as termination and re-adoption with a new cooling-off period.
• Form 4 checkbox and adoption date disclosed for each transaction reported.
• Issuer quarterly disclosure updated to reflect plan adoption.

FAQ

Do 10b5-1 plans need to be filed with the SEC? No. The plan document itself is not filed with the SEC. What must be filed is the Form 4 or Form 5 reporting each transaction under the plan, with the Rule 10b5-1 checkbox checked and the adoption date disclosed. Issuers must also include plan-level disclosure in their periodic reports.

Can a 10b5-1 plan be cancelled? Yes. Cancellation is permitted, but it carries risk. If the cancellation is made while the insider is aware of MNPI, the SEC may view the cancellation itself as evidence that the original plan was not adopted in good faith. Early termination of the first of two sequential plans also resets the cooling-off clock for the second plan.

What is the 10b-5 rule, and how does it relate to 10b5-1 plans? Rule 10b-5 is the SEC's primary anti-fraud rule under Section 10(b) of the Securities Exchange Act of 1934. It prohibits trading on the basis of MNPI. Rule 10b5-1 creates a safe harbor from Rule 10b-5 liability for pre-planned trades that meet all the conditions in Rule 10b5-1(c)(1). The plan is the defense; Rule 10b-5 is what it defends against.

Does plan modification always trigger a new cooling-off period? Yes, if the modification changes the amount, price, or timing of trades (or a related formula). The amended rule treats such a modification as a termination of the existing plan and adoption of a new one. Administrative changes, such as broker substitution, do not trigger a new cooling-off period.

Do the new rules apply to issuer share repurchase plans? No. The cooling-off period, overlapping-plan prohibition, and single-trade plan limit do not apply to issuers' own repurchase programs under the 2022 amendments. Issuers and individual insiders are treated differently.

What enforcement risk exists if a plan fails to meet the adoption conditions? A plan that does not satisfy all conditions in Rule 10b5-1(c)(1) provides no affirmative defense. The insider is then subject to full insider trading liability under Rule 10b-5 for any trades executed under the plan. The SEC has signaled continued scrutiny of plan adoption practices since the 2022 amendments took effect, and enforcement actions referencing the amended rule's conditions have begun to emerge.

For the full picture on how these requirements interact with Section 16 reporting obligations, see our Section 16 Insider Reporting Compliance Guide 2026.