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chapter 4

Best Practices

Navigating Rule 10b5-1 for Insiders and Key Employees

Company insiders who want to buy or sell company stock, face two major hurdles. One is a great deal of uncertainty as to what is permissible and what might trigger potential insider trading liability, under SEC Rule 10b5. The other is infrequent, brief trading windows established by companies to allow insider transactions. SEC Rule 10b5-1 gives directors, officers and others with access to material nonpublic information, also called insider information, about their company a way to buy and sell company stock in a pre-established written trading plan. At Morgan Stanley, a 10b5-1 Preset Diversification Program® (PDP) — most commonly known as a 10b5-1 Trading Plan — can help you to achieve your portfolio objectives while providing an affirmative defense against allegations of insider trading.

Key Benefits:

  • Affirmative defense against potential claims of insider trading
  • Access to public markets without regard to corporate blackout periods
  • Reduce the risk associated with a concentrated equity position through diversification
  • Discipline during volatile market fluctuations to help achieve personal monetization needs
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