Insider Trading Policy
Corporate rules restricting employees and directors from trading on material non-public information.
What is Insider Trading Policy?
An insider trading policy is a corporate governance document that restricts employees, officers, and directors from trading company securities when they possess material, non-public information (MNPI) — information that a reasonable investor would consider important and that has not been publicly disclosed. SEC Rule 10b-5 prohibits insider trading, and corporate policies typically establish designated trading windows (often following quarterly earnings releases), pre-clearance requirements for senior executives, and blackout periods. Companies may also establish Rule 10b5-1 trading plans that allow pre-scheduled, formula-based trades by insiders at times when they do not hold MNPI, providing an affirmative defense against insider trading allegations.
Example
In 2022, the SEC adopted amendments to Rule 10b5-1, requiring executive officers and directors to observe a 90-day cooling-off period before trading under a new 10b5-1 plan. The amendments addressed concerns that executives were entering plans with immediate trading dates, undermining the plans' purpose as a good-faith defense against insider trading.
Source: SEC — Amendments to Rule 10b5-1 (Release No. 33-11138)