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Another Look at Rule 10b5-1 Trading Plans

By Aegis J. Frumento and Stephanie Korenman
December 31, 2013

By establishing a prearranged plan to trade their companies' stock in compliance with SEC Rule 10b5-1, corporate executives avail themselves of the only formally codified affirmative defense against a charge of insider trading. However, statistical evidence demonstrating that executives in trading plans outperform their peers by 6% to 10% have twice brought trading plans under academic and journalistic scrutiny. Each time ultimately voices the recurring fear the rest of us have that executives who use such plans are getting away with insider trading.

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