What is a 10b5-1 trading plan and why would I use one?

A 10b5-1 plan is a pre-arranged, written schedule for buying or selling your company stock that you set up while you don't possess material non-public information. Once active, trades execute automatically on the dates or price triggers you specified, which gives you an affirmative defense against insider-trading accusations even if you later learn confidential news. Executives and insiders use them to sell RSU and option shares steadily without worrying about blackout windows. From a tax angle, a 10b5-1 plan is a disciplined way to diversify out of concentrated employer stock on autopilot, spreading sales across the year. SEC rules now impose a cooling-off period before the first trade. If you're an insider sitting on a heavy position, a plan removes the temptation to time the market.