10b5-1 Plan Modification Rules: A 2026 Practitioner Walkthrough

If you are a director, officer, or compliance officer managing a Rule 10b5-1 trading plan, the modification rules are where the most consequential compliance risk lives. The SEC's December 2022 amendments, fully operative since early 2023, treat almost any change to a plan as a brand-new adoption, resetting the clock, requiring fresh certifications, and potentially stranding an insider in a trading blackout they did not see coming.

This walkthrough answers the granular questions that existing guidance leaves open: what exactly triggers a modification, what happens next, and how to structure plan governance so you do not inadvertently lose the affirmative defense.

Key takeaway: Under the amended Rule 10b5-1(c)(1), any change to the amount, price, or timing of trades is treated as a plan termination and new adoption, triggering the full cooling-off period, a fresh written certification, and all other conditions of the amended rule. One modification per plan term is the hard limit for directors and officers.

What Counts as a 10b5-1 Plan Modification?

A modification is any change to the amount, price, or timing of trades under an existing plan, including changes to a related trading formula or algorithm. The SEC's adopting release (Release No. 33-11138) does not provide an exhaustive list, which is precisely where compliance anxiety concentrates.

Here is how the most common edge cases break down based on the adopting release and practitioner guidance:

The broker substitution question is one practitioners ask constantly. The regulation text at 17 CFR § 240.10b5-1 notes that a plan modification includes "the substitution or removal of a broker" executing trades under the plan. That language strongly suggests that changing your executing broker-dealer is a modification, not a permissible administrative act, and should be treated as such until the SEC provides contrary guidance.

One structural point that the rule makes explicit: a series of separate contracts with different broker-dealers executing trades pursuant to what is functionally a single plan is treated as a single plan. Splitting execution across multiple brokers does not create multiple plans, and modifying or terminating any one of those contracts constitutes a modification of the whole arrangement.

What a Modification Triggers: The Full Cascade

When a modification occurs, three things happen simultaneously:

1. The existing plan is treated as terminated. The affirmative defense for any future trades under the original plan is gone.
2. A new cooling-off period starts from scratch. For directors and officers, that is the later of 90 days or two business days after the next quarterly or annual earnings filing, capped at 120 days. For non-director/officer insiders, it is a flat 30 days. (See our 10b5-1 plan cooling-off period walkthrough for the full calculation mechanics.)
3. Fresh written certifications are required. Directors and officers must certify in the modified plan, at the time of modification, that they are not aware of MNPI and are acting in good faith, not as part of a scheme to evade Rule 10b-5. These certifications must be contemporaneous; they cannot be made retroactively.

As Cooley confirmed: "The amended rules impose a mandatory cooling-off period on all individuals, other than issuers, who adopt or modify a 10b5-1 plan."

The practical consequence: an insider who modifies a plan mid-quarter expecting to trade in the next open window may find the cooling-off period pushes them well past that window. If the modification happens late in a fiscal quarter, the two-business-days-after-earnings trigger can push the effective waiting period close to the 120-day cap regardless of when in the quarter the change was made.

The One-Modification Limit: How It Works in Practice

Directors and officers may modify a plan only once during its term and retain the affirmative defense. A second modification causes an immediate loss of protection, the insider must terminate the plan and adopt a new one, subject to a fresh cooling-off period and all new-plan conditions.

Sandisk Corporation's insider trading policy, filed as Exhibit 19.1 with the SEC in 2025, states this plainly: "A 10b5-1 Trading Plan may not be modified more than once during its term; and a 10b5-1 Trading Plan that is modified must satisfy all of the requirements of" the amended rule. That is the operational standard leading companies are embedding in their insider trading policies.

Two practical implications compliance teams often miss:

• The one-modification limit is per plan, not per person. If an insider terminates a plan that has already been modified once and adopts a new plan, the new plan starts with a clean slate, one modification available for its term. Each plan has its own limit.
• The limit interacts with early termination. If an insider terminates a plan before all trades execute and adopts a successor plan, the first trade under the successor plan cannot occur until after the applicable cooling-off period following the termination. The successor plan is treated as a new adoption in full.

Modify vs. Terminate-and-Replace: Which Is Better?

This is the decision most insiders and their counsel face when circumstances change. There is no universally correct answer, but the framework is straightforward:

Modify if:

• The plan has not yet been modified (modification slot is available).
• The change is genuinely minor and the insider can absorb the cooling-off delay.
• The insider is not aware of MNPI and can certify in good faith at the time of modification.

Terminate and replace if:

• The plan has already been modified once (a second modification kills the defense).
• The changes needed are extensive enough that a fresh plan is cleaner.
• The insider wants to reset the plan structure entirely.

In both cases, the cooling-off period restarts. The difference is that termination-and-replacement gives the insider a clean modification slate on the new plan, while a modification consumes the one available slot on the existing plan.

Practitioner tip: Draft plan terms broadly enough to reduce the need for future modifications. Building agent discretion into the plan (rather than fixed price or quantity parameters) means market conditions can be accommodated without triggering a modification. A plan that gives the broker discretion over whether to execute as a single transaction, or that ties execution to formula-driven parameters, is less likely to require amendment.

The Grandfathering Trap for Pre-2023 Plans

Plans adopted before February 27, 2023 retained their grandfathered status under the pre-amendment rule, but only until they were touched. As Davis Polk noted in materials published through TheCorporateCounsel.net: "The amendments to Rule 10b5-1 do not affect plans adopted prior to the effective date. A plan that is modified after the effective date would be treated as if it were adopted after the effective date and therefore would be subject to the amended rule."

Cooley confirmed the same point: the grandfathering carve-out is narrow. Any post-effective-date modification, however minor, strips grandfathering entirely and subjects the plan to the full amended rule.

By mid-2026, a pre-2023 plan that has survived unmodified for more than three years is increasingly rare. If your company still has one in place, the question is not whether to eventually replace it, it is whether to do so proactively now, on your own timeline, or reactively when a modification becomes necessary. Proactive replacement gives the insider control over when the cooling-off period runs.

Quarterly Disclosure Obligations When a Plan Is Modified

Modification triggers disclosure obligations that many compliance teams underestimate. New Item 408 of Regulation S-K requires quarterly disclosure in the 10-Q (or 20-F for foreign private issuers) of the adoption, modification, and termination of Rule 10b5-1 plans by directors and officers.

The required disclosure includes a description of the material terms of the plan, but explicitly excludes pricing terms. That creates a drafting challenge: enough detail to satisfy the rule, not so much that you reveal competitively sensitive trading parameters.

In practice, Item 408 disclosures should cover:

• The name and title of the director or officer
• Whether the action was an adoption, modification, or termination
• The date of the action
• The aggregate number of securities to be purchased or sold (if determinable)
• The duration of the plan
• Pricing terms are excluded

The SEC's Division of Corporation Finance has been reviewing Item 408 disclosures since mid-2023, and comment letters have flagged deficiencies, particularly where companies describe plan modifications too vaguely or omit the date of modification. These comment letters are publicly available on EDGAR and are worth reviewing before drafting your own disclosure language.

Item 408 also requires annual disclosure of whether the issuer has adopted insider trading policies and procedures, and that annual disclosure must be XBRL-tagged.

Form 4 Consequences of a Modification

When a trade executes under a modified plan, the Section 16 insider must file a Form 4 within two business days of the transaction. The amended forms now require a checkbox indicating whether the transaction was made pursuant to a plan intended to satisfy the Rule 10b5-1(c) affirmative defense, along with the date the plan was adopted.

For a modified plan, the "date adopted" field should reflect the date of the modification, because under the amended rule, the modification is treated as a new adoption. This creates a public, searchable record on EDGAR linking each trade to its plan history. SEC staff and plaintiffs' counsel can and do cross-reference Form 4 plan-adoption dates against the issuer's quarterly Item 408 disclosures to identify inconsistencies.

For more on Form 4 mechanics, see our Section 16 reporting for derivative securities walkthrough.

The Ongoing Good-Faith Requirement After Modification

The amended rule extends the good-faith requirement throughout the life of the plan, not just at adoption or modification. The SEC's adopting release specifically cites as a violation the scenario where an insider influences the timing of the issuer's MNPI disclosure to make trades under the plan more profitable, even if the plan itself was properly adopted and has not been formally modified.

This creates a compliance question that practitioners rarely discuss: what if an insider becomes aware of MNPI after adopting a valid plan and wants to pause trading? Requesting a modification to suspend trades would itself be a modification, triggering the cooling-off period. But continuing to trade under the plan while aware of MNPI raises a good-faith question even if the plan parameters have not changed. The safest path is to seek legal counsel immediately and consider whether termination, not modification, is the appropriate response.

Skadden's analysis confirms that certifications must be made at the time of adoption or modification, not retroactively, which means the good-faith assessment is locked in at the moment of signing.

Equity Compensation Plans: What Is Exempt

Not all plan types are subject to the modification rules in the same way. Two categories are explicitly exempt from the overlapping-plan prohibition and the single-trade-plan limitation:

• Sell-to-cover plans: Plans authorizing an agent to sell only enough securities to satisfy tax withholding obligations from vesting of compensatory awards, where the award holder cannot control the timing of sales. These are exempt from the overlapping-plan prohibition and the single-trade-plan limit, a significant carve-out for equity compensation plan administration.
• Plans transacting directly with the issuer: ESOPs and DRIPs are exempt from the overlapping-plan prohibition because they are not executed on the open market.

These exemptions do not mean sell-to-cover and DRIP/ESOP plans are entirely outside the rule's reach. They still must be adopted in good faith and without MNPI. But they do not consume the insider's one available "slot" for a qualifying 10b5-1 plan, and they do not count toward the single-trade-plan limit.

Issuers' own share repurchase plans are not subject to the cooling-off period, the overlapping-plan prohibition, or the single-trade-plan limitation. The SEC declined to impose those restrictions on issuer repurchase plans in the final rule, though it indicated further consideration was ongoing.

Modification Compliance Checklist

Before approving any change to an existing 10b5-1 plan, work through this sequence:

1. Classify the change. Does it affect the amount, price, or timing of trades, or the executing broker? If yes, it is a modification. If genuinely administrative only (e.g., updating a notice address), document that conclusion carefully.
2. Check the modification count. Has this plan already been modified once? If yes, a second modification destroys the affirmative defense. Terminate and adopt a new plan instead.
3. Confirm the insider is not aware of MNPI. The written certification must be made at the time of modification. If the insider cannot certify in good faith, do not proceed.
4. Calculate the new cooling-off period. For directors and officers: the later of 90 days or two business days after the next 10-Q or 10-K filing, capped at 120 days. For other non-issuer insiders: 30 days. Map this against the company's blackout calendar, the insider may be unable to trade for an extended period.
5. Update plan documentation. The modified plan must include the fresh written certification and comply with all conditions of the amended rule.
6. Prepare Item 408 disclosure. Draft the quarterly disclosure describing the modification, including date and material terms (excluding pricing). Have legal review it before the 10-Q is filed.
7. Coordinate with the broker. Confirm the broker will not execute any trades before the cooling-off period expires. Get written confirmation of the new earliest-trade date.
8. Update Form 4 records. When trades eventually execute, the Form 4 checkbox and plan-adoption date must reflect the modification date, not the original adoption date.

For the full adoption process from scratch, see our 10b5-1 plan adoption requirements walkthrough.

FAQ

Does pausing a 10b5-1 plan count as a modification? Almost certainly yes. Pausing trading changes the timing of trades under the plan, which falls squarely within the SEC's definition of a modification. Treat any suspension of trading as a modification and apply the full cascade of consequences.

Can a director modify a plan more than once and keep the affirmative defense? No. The amended rule limits directors and officers to one modification per plan term. A second modification causes loss of the affirmative defense for future trades under that plan. The insider must terminate and adopt a new plan.

Does terminating a plan and adopting a new one count as a modification? No. Termination followed by a new adoption is treated as a fresh adoption, not a modification of the original plan. The new plan starts with a clean one-modification slate. However, if the original plan was terminated early, the first trade under the successor plan cannot occur until after the applicable cooling-off period following the termination.

What happens to a pre-2023 plan if it is modified today? It loses grandfathered status immediately and is treated as if newly adopted under the amended rule. The full cooling-off period, certification requirement, and one-modification limit all apply from that point forward.

Do issuer share repurchase plans have to follow the modification rules? No. The SEC did not impose cooling-off periods, overlapping-plan restrictions, or single-trade-plan limits on issuer repurchase plans. Those restrictions apply only to individual insiders and other non-issuer persons.

What must be disclosed in the quarterly 10-Q when a plan is modified? Item 408 of Regulation S-K requires disclosure of the modification, including the director's or officer's name and title, the date of modification, and the material terms of the plan, but explicitly excluding pricing terms. XBRL tagging is required for the annual insider trading policy disclosure.

Are sell-to-cover plans subject to the modification rules? Sell-to-cover plans are exempt from the overlapping-plan prohibition and the single-trade-plan limit, but they must still be adopted in good faith and without MNPI. They are not entirely outside the rule's reach.