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If your client is an insider of a company and wants to sell company stock while protecting against claims of insider trading, a traditional approach has been to create a Rule 10b5-1 plan (10b5-1 plan). If properly structured and executed, a 10b5-1 plan affords an insider exposed to material non-public information (MNPI) with an affirmative defense against claims of insider trading.
Yet 10b5-1 plans have a downside. They’re rigid. The idea behind the 10b5-1 plan is that, if your client instructs a broker on the sale of their company stock when they’re not in possession of MNPI, and the broker follows their instructions, the sale couldn’t have been influenced by MNPI your client later received. While simple in concept, the idea is premised ...
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