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

Terminating a Rule 10b5-1 plan sounds simple. It is not. Done carelessly, an early exit can retroactively destroy the affirmative defense for trades already executed, restart the cooling-off clock for any successor plan, and land in the next quarterly filing as a required disclosure. This guide is for CFOs, general counsel, and compliance officers who need to make a real, defensible decision about whether and how to terminate a plan under the SEC's December 2022 amendments.

Key takeaway: The 2022 amendments, effective February 27, 2023, made termination one of the highest-risk acts in 10b5-1 plan administration. The legal consequences depend on why you terminate, when you terminate, and whether you have a successor plan waiting.

What Actually Happens When You Terminate a 10b5-1 Plan

Terminating a 10b5-1 plan does not automatically expose you to insider trading liability, but it can destroy the affirmative defense you were relying on. The affirmative defense under 17 CFR § 240.10b5-1 requires that the plan was entered into in good faith and that the person acted in good faith throughout the plan's duration. A termination decision that is driven by MNPI fails that second test.

The critical and widely misunderstood risk: a bad-faith termination does not just affect future trades. It can retroactively undermine the affirmative defense for trades already executed under the plan. If the SEC or DOJ concludes that you terminated because you knew negative news was coming, every prior sale under that plan becomes potentially tainted. Mayer Brown's January 2025 guidance summarises the SEC's position plainly: "Cancellations or modifications of a Rule 10b5-1 plan may not be conducted in a manner to benefit from MNPI."

The SEC's adopting release for the 2022 amendments cited academic research showing that insiders who cancelled plans before negative earnings announcements avoided average losses of approximately 20% in the months following cancellation. That empirical pattern is why termination is now a primary enforcement focus, not a footnote.

Voluntary Early Termination vs. Natural Expiration vs. Automatic Suspension

Not all plan endings are equal. The legal consequences differ sharply depending on how the plan ends.

Natural expiration is the cleanest outcome. A fixed-duration plan that runs its course is not treated as an early termination and does not trigger the same cooling-off consequences for a successor plan. The compliance risk is concentrated in voluntary, active terminations.

Automatic suspension or termination provisions are common in company-drafted plan templates, particularly for M&A situations. As Mayer Brown notes, companies include these provisions "to allow persons to make decisions in connection with major corporate transactions and to avoid [liability]." The idea is that the plan pauses mechanically, without the insider making an active decision while in possession of MNPI. Whether such a provision constitutes a "modification" that resets the cooling-off period is a nuanced drafting question with no bright-line SEC answer. Get legal review before relying on an automatic clause as a safe harbour.

Sell-to-cover plans (plans authorising an agent to sell only enough securities to satisfy tax withholding from vesting of compensatory awards) are exempt from the single-plan prohibition and carry different termination rules. If your plan is a sell-to-cover arrangement, confirm with counsel whether the standard termination analysis applies.

For a deeper look at how the cooling-off period is calculated from scratch, see our 10b5-1 plan cooling-off period practitioner walkthrough.

The Sequential-Plan Trap: Early Termination of Plan 1 Restarts the Clock for Plan 2

This is the rule that catches the most insiders off guard, and none of the top-ranking pages explain it with enough specificity.

Under the 2022 amendments, a person (other than an issuer) may maintain two sequential Rule 10b5-1 plans, but only under a narrow exception: trading under the later-commencing plan cannot begin until all trades under the earlier plan are completed or expire without execution. If you terminate Plan 1 early, the exception collapses. As Skadden's client alert states directly: "If the first plan is terminated early, the first trade under the later-commencing plan must not be scheduled to occur until after the effective cooling-off period following the termination of the earlier plan."

Worked example. A CFO adopts Plan 1 in January 2026 and Plan 2 in March 2026, with Plan 2 structured not to begin trading until Plan 1 completes in June 2026. In May 2026, the CFO terminates Plan 1 early. The cooling-off period for Plan 2 now restarts from the May termination date. For a director or officer, that means the later of 90 days from termination or two business days after the next 10-Q or 10-K filing, capped at 120 days. Plan 2 cannot trade in June as originally scheduled. Depending on the 10-Q filing date, trading might not be permissible until September or October 2026.

The practical implication: if you are considering early termination of Plan 1 and you have a successor plan in place, model the new cooling-off timeline before you act. A termination that feels administratively convenient can delay successor-plan trading by months.

How the Cooling-Off Period Works After Termination

After a voluntary early termination, the cooling-off period for any new plan restarts in full. The 2022 amendments treat a modification as a termination and re-adoption, and the same logic applies to an outright termination followed by a new plan.

The cooling-off periods under SEC Release No. 33-11138 are:

• Directors and officers: the later of (i) 90 days after adoption or modification of the new plan, or (ii) two business days after the Form 10-Q or 10-K filing for the fiscal quarter in which the new plan was adopted, with a hard cap of 120 days.
• Other persons (non-directors/officers): 30 days after adoption of the new plan.

Some retail-facing guidance (including Charles Schwab's explainer) describes a "30-day trading lock-up" after termination. That characterisation applies only to non-director/officer persons. Directors and officers face up to 120 days before trading can begin under a successor plan, and the MNPI analysis runs throughout.

For the mechanics of calculating these periods precisely, including the two-business-day rule and how it interacts with quarterly filing dates, see our 10b5-1 plan cooling-off period walkthrough.

Termination vs. Modification: Different Triggers, Same Cooling-Off Reset

Termination and modification are legally distinct acts, but they share one critical consequence: both reset the cooling-off period for any successor or modified plan.

Under the 2022 amendments, any change to the amount, price, or timing of trades under a plan constitutes a termination of the existing plan and adoption of a new one. That means adjusting price limits, changing trade quantities, or swapping brokers (in some circumstances) can trigger the same cooling-off restart as an outright termination. The distinction matters for documentation and intent analysis, but not for the cooling-off consequence.

Where termination and modification diverge is in the retroactive defense risk. A modification that is made while aware of MNPI is explicitly prohibited and can taint the entire plan. An outright termination while aware of MNPI carries the same risk, plus the additional enforcement signal of a complete exit from the plan.

For a full treatment of what counts as a modification and how to avoid accidental resets, see our 10b5-1 plan modification rules practitioner walkthrough.

Disclosure Obligations When You Terminate a Plan

Issuers must disclose any termination of a Rule 10b5-1 plan by a director or officer in their next quarterly filing. This is not optional and is not limited to terminations that look suspicious.

Item 408(a) of Regulation S-K, as amended by the 2022 rulemaking, requires issuers to disclose in Form 10-Q and Form 10-K the adoption, modification, or termination of any Rule 10b5-1 plan or non-Rule 10b5-1 trading arrangement by a director or officer during the most recently completed fiscal quarter. The disclosure must include the material terms of the plan. As of 2026, all public companies are subject to these requirements, with accelerated and large accelerated filers having been subject since the first full fiscal period beginning on or after April 1, 2023.

What this means in practice:

• If a director terminates a plan in Q3, the Q3 Form 10-Q must disclose it.
• The disclosure must cover the material terms: the person's name, the date of termination, and a description of the plan's original scope.
• Non-Rule 10b5-1 trading arrangements (plans that do not qualify for the affirmative defense) are also covered by this disclosure requirement.

The SEC's Compliance and Disclosure Interpretations on Rule 10b5-1 are the most granular official guidance on edge cases. Compliance teams should monitor them, as the SEC staff updates them periodically.

The Form 4 Audit Trail: A New Enforcement Risk

The 2022 amendments also updated Forms 4 and 5 to require insiders to check a box indicating whether a reported transaction was made pursuant to a Rule 10b5-1 plan. Section 16 reporting persons were required to comply with this checkbox requirement for filings on or after April 1, 2023.

This creates a public, cross-referenceable audit trail. Any trade reported on Form 4 after a plan termination date will not carry the 10b5-1 checkbox, making it immediately visible that the insider traded outside a plan. Investigators can compare Form 4 filing dates against disclosed plan termination dates and against the timing of corporate announcements. This is not a theoretical risk. The DOJ used exactly this kind of timing analysis in the prosecution of Terren Scott Peizer, the former CEO of Ontrak, who was sentenced in June 2025 to 42 months imprisonment and ordered to pay a $5.25 million fine after being convicted in the first criminal case based on the use of a Rule 10b5-1 plan. Prosecutors demonstrated that the plan was adopted while Peizer possessed MNPI about a major customer's likely departure.

For the mechanics of Form 4 reporting and the 10b5-1 checkbox, see our Form 4 vs Form 5 SEC reporting comparison.

What the SEC and DOJ Consider Bad-Faith Termination

Neither the SEC nor the DOJ has published a bright-line definition of bad-faith termination, but the enforcement record and the adopting release make the red flags clear.

The SEC views the following patterns as evidence of bad faith:

• Terminating a plan shortly before a negative earnings announcement or a material adverse event.
• Terminating a plan and then trading outside of any plan during a period when the insider possessed MNPI.
• A pattern of terminations that are statistically correlated with subsequent stock price declines (the academic research cited in the SEC's adopting release found exactly this pattern in S&P 500 executive data from 2016 to 2021).
• Influencing the timing of the issuer's disclosures in a way that benefits the insider's plan trades or termination decisions. As Skadden notes, the SEC's expanded good-faith requirement means that "influencing the timing of an issuer's disclosure so that trades under a plan are more profitable would run afoul of this ongoing good faith requirement."

The DOJ has gone further, using plan termination timing as direct evidence in insider trading prosecutions under mail and wire fraud statutes, which do not require an actual trade "in connection with" a security. This means that even a termination that does not result in any subsequent trade can, in theory, support criminal liability under those statutes.

Pre-Termination Compliance Checklist

Before terminating a 10b5-1 plan, work through each of these steps. This is not a substitute for legal counsel, but it is the minimum a compliance-conscious insider should do.

1. Assess your MNPI status. Are you aware of any material nonpublic information about the issuer or its securities? If yes, stop. Terminating while aware of MNPI is the clearest path to losing the affirmative defense and drawing enforcement scrutiny.

2. Check whether you are in a blackout period. Even if no trades are occurring, terminating during a blackout period can raise questions about your motivation. Review the company's insider trading policy.

3. Identify whether you have a successor plan. If Plan 2 is already in place, model the new cooling-off timeline from the termination date before you proceed. Confirm that Plan 2's first scheduled trade falls after the applicable cooling-off period.

4. Determine whether termination is actually necessary. Could the plan expire naturally? Could an automatic suspension clause handle the situation without triggering a termination? Natural expiration avoids the cooling-off restart and carries lower enforcement risk.

5. Obtain pre-clearance from the compliance officer or general counsel. Most updated insider trading policies now require pre-clearance for plan terminations, not just adoptions. If your policy does not, it should.

6. Document the reason for termination in writing. A contemporaneous written record of the business or personal reason for termination (e.g., change in financial planning needs, plan has achieved its diversification objective, plan term is ending early due to a life event) is the foundation of a good-faith defense. Vague or undocumented terminations are harder to defend.

7. Confirm the quarterly disclosure obligation. Identify the next Form 10-Q or Form 10-K filing date and ensure the termination is disclosed under Item 408(a) of Regulation S-K, with the required material terms.

8. Review Form 4 implications. Any trades after the termination date will not carry the 10b5-1 checkbox. Make sure no trades are planned or executed outside of a valid plan during the post-termination period.

9. Seek legal review before acting. Big-4 and major law firm guidance consistently advises that companies update their insider trading policies to require legal review before any early exit from a plan. This is not boilerplate caution; it reflects the enforcement environment.

FAQ

Can I terminate my 10b5-1 plan early without losing the affirmative defense for past trades? Yes, if the termination is made in good faith and not while aware of MNPI. The affirmative defense for prior trades survives a clean, good-faith termination. But if the SEC or DOJ concludes the termination was MNPI-driven, every prior trade under the plan is potentially exposed.

Does terminating a plan trigger a new cooling-off period before I can trade again? Not directly, but if you adopt a new plan after termination, the full cooling-off period restarts from the date of the new plan's adoption. For directors and officers, that is up to 120 days. You cannot simply terminate and immediately trade outside a plan without separate MNPI analysis.

What happens to my second plan if I terminate the first plan early? The cooling-off period for the second plan restarts from the date of the first plan's early termination. The second plan cannot begin trading until the applicable cooling-off period has elapsed from that termination date, not from the second plan's original adoption date.

Do I have to disclose a plan termination in SEC filings? Yes. Under Item 408(a) of Regulation S-K, issuers must disclose any termination of a Rule 10b5-1 plan by a director or officer in the Form 10-Q or Form 10-K covering the quarter in which the termination occurred. As of 2026, all public companies are subject to this requirement.

Is termination treated the same as modification under the 2022 rules? For cooling-off purposes, yes: both reset the clock for any successor or modified plan. The difference is in the retroactive defense analysis and the enforcement optics. A modification while aware of MNPI is explicitly prohibited; an outright termination while aware of MNPI carries the same substantive risk plus the additional signal of a complete exit.

Are issuer share repurchase plans subject to the same termination rules? No. The 2022 amendments explicitly excluded issuer plans for share repurchases from the cooling-off period requirements and the single-plan and overlapping-plan restrictions. The termination rules discussed in this article apply to individual insiders, not to issuer repurchase programs.