As discussed previously on this blog, not all insider trading is indicative of future stock performance, and filtering the signal from the noise should be the first step for any investor aiming to profit from insider transaction data. This is not a trivial task, and research shows that transactions that seem uninformative at first glance can be informative.

In the U.S., the world’s largest stock market, anyone with access to material non-public information (MNPI) about a particular company must publish their transaction in company shares through the SEC with a Form 4 filing. In addition to data about the trade itself, such filings indicate whether it occurred under a 10b5-1 plan or not. A 10b5-1 plan can be set up by anyone with access to material non-public information, or by the company itself for its employees, and lays out the date, amount, and pricing of future stock transactions. It serves as an affirmative defense against allegations of illegal insider trading — a transaction (presumably) cannot be a reaction to non-public information if it was planned in advance.

Insiders can benefit even from pre-planned trades

Research shows that even if all trades conducted by an insider occur under a 10b5-1 plan, they can still benefit from their privileged position by:

  • establishing multiple overlapping plans and selectively canceling trades on the basis of MNPI
  • establishing plans after becoming aware of MNPI, with a transaction scheduled before that information becomes public
  • donating shares to receive tax benefits tied to their current market value, while being aware of MNPI that would imply a significantly lower value
  • controlling when MNPI is disclosed such that it benefits their pre-planned trades

Some papers even suggest that the legal protection afforded by 10b5-1 plans could enable insiders to be more aggressive in pursuing privileged trades, and ultimately lead to them outperforming insiders who don’t adopt such plans.

The 2022 10b5-1 reforms

The SEC officers read academic papers, too, and in 2021 proposed a set of changes to the rules underlying 10b5-1 plans:

  • A cooling-off period: After adopting a 10b5-1 plan, insiders must wait at least 90 days, or at least 2 days after the next quarterly report, whichever is longer, before the affirmative legal defense becomes active. Insiders who are not directors or officers (e.g. 10%-owners) have a waiting period of only 30 days.
  • Good-faith certifications: Insiders must certify in writing that they are not aware of MNPI at the time of plan adoption (this was already the rule, only the certification requirement is new).
  • Ban on overlapping plans: Only one plan may be active per time period.
  • Single-trade plan limits: Plans that include only a single trade are limited to one every 12 months.
  • Gift reporting: Bona fide gifts of securities must be reported on Form 4 within two business days, just like transactions, instead of later reporting via Form 5.

Are the reforms effective?

Research from May 2026 indicates that the amendments did indeed reduce opportunistic insider trading, but did not eliminate it. Trading patterns that would be prohibited under the new rules were substantially reduced, rather than being replaced by non-10b5-1 trades, indicating that insiders are cautious of legal liability when not protected by the affirmative defense afforded by the rule. Still, some avenues for profitable insider trading remain: Data shows that terminations of 10b5-1 plans are associated with positive subsequent returns, suggesting that insiders avoid selling when they expect good news (or an absence of bad news). The reforms also do not prevent insiders from timing the disclosure of information around the dates of their pre-arranged transactions.

10b5-1 transactions can still be informative

What does this mean for investors trying to benefit from publicly disclosed insider transaction data? Whether a particular transaction occurred under a 10b5-1 plan, by itself, does not tell us whether it is informative or not. Instead we need to consider the context of the transaction:

  • Is the transaction value greater than usual for that particular insider? This could indicate a plan change adopted in the face of inside information, though under the new rules such a change must have occurred at least 90 days ago (or 30 days if the insider is not a director or officer).
  • Does the transaction escape from the insider’s usual pattern? While 10b5-1 plans can in theory specify almost any sequence of trades, in practice long-running plans often use regular patterns (e.g. particular dates every month, quarter, or year). If a particular transaction escapes from the insider’s usual pattern, it could indicate a plan change or a newly adopted single-trade plan in response to MNPI.
  • How does the transaction value compare to the insider’s total ownership (also reported on Form 4 filings)?
  • Is the insider in a position to control the disclosure of material information (usually this means company officers, in particular the Chief Legal Officer or General Counsel, Chief Financial Officer, and Principal Accounting Officer)? If they are, they may have the ability to control the disclosure of important news to benefit their own transactions.

A single filing is unlikely to be helpful. Only in the context of all insider transactions for a company can useful signals emerge.