10b5-1 cooling-off period
Also: cooling-off period, 10b5-1 cooling off, 10b5-1 waiting period
A minimum waiting period between adopting or modifying a 10b5-1 plan and the first trade under that plan. 90 days for officers and directors, 30 days for other employees; new plans after a prior cycle require 120 days.
The cooling-off period is the SEC-mandated waiting window between the date a 10b5-1 plan is adopted (or materially modified) and the first trade under that plan. Under the 2022 amendments to Rule 10b5-1, officers and directors must wait at least 90 days before the first trade, and 120 days if the prior plan terminated in the same 12-month period. Non-insider employees wait 30 days. The cooling-off period gives a clean window where the information environment has turned over before automated trading begins.
Example: a senior VP adopts a 10b5-1 plan on February 3 for 1,000-share monthly sales starting on the 10th of each month. The first eligible trade date is May 4, 90 days later. The plan executes on May 10 for the first trade and continues monthly.
Common mistake: pairing 10b5-1 adoption with an earnings release or material announcement. The SEC scrutinizes plans adopted just before positive news. Adopt the plan well inside a quiet information period to keep the affirmative defense intact.
Cooling-off periods matter at plan adoption, at modification, and when a plan is terminated and replaced mid-year.