10b5-1 trading plans can be a valuable tool in wealth building by permitting an executive to trade in employer stock during blackouts, particularly for executives who may be in a virtually perpetual blackout. The plans can also be used as a way to satisfy exercise prices and tax obligations on equity awards. Business PointGiven that an executive must enter into a 10b5-1 trading plan in “good faith” and “not as part of a plan or scheme to evade”1 insider trading restrictions, the executive should take into account best practices regarding the implementation of such plans to increase the chances that the Rule 10b5-1 affirmative defense to insider trading applies to trades under the plan. Technical PointsBelow is a list of some best practices for executives to consider with respect to 10b5-1 trading plans:Review the issuer’s insider trading and hedging policies, and stock ownership guidelines.Determine whether (i) the issuer must approve the form of plan, (ii) the issuer requires a particular form or designated broker and (iii) pre-clearance of the plan is required under the insider trading policy.Adopt a plan only when the executive could otherwise trade under the issuer’s insider trading policy, as this will support the good faith requirement.Include a… Read full this story
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