Why 10b5-1 Plans Are More Than a Compliance Checkbox

If you are sitting on a mountain of RSUs or company stock, you likely know the standard advice. Diversify. Avoid insider trading violations. Set up a 10b5-1 plan.

But too many executives treat these plans as a formality. In reality, a 10b5-1 plan can do much more than keep you compliant. It can create:

• Steady cash flow
  
• Better tax outcomes
  
• Market-friendly optics
  

Let’s be honest. If you have RSUs vesting regularly, you are going to sell stock eventually. The real question is whether your sales will look erratic or like a well-planned strategy that protects your reputation and your portfolio.

I have seen the damage when there is no plan. One executive had 70 percent of their net worth tied up in company stock. When the tech sector sold off, they lost seven figures. With no 10b5-1 plan, they were restricted from selling during blackout windows and had no options.

The smarter move is to turn those inevitable sales into a proactive wealth strategy.

What Is a 10b5-1 Plan?

A 10b5-1 plan is a legally binding, pre-scheduled trading plan that allows insiders to sell stock according to rules they set in advance.

The plan must be adopted when you are not in possession of material nonpublic information. Once activated, trades occur automatically, even if you are later in a blackout window or hold insider knowledge.

It serves as a legal safeguard and protects you from allegations of insider trading.

Examples of plan structures include:

• Sell 10,000 shares on the first of each month, but only if the stock is above $250
  
• Sell $150,000 worth of stock quarterly, evenly spaced across trading days
  

This structure brings discipline to your equity sales and keeps you in control of the narrative, tax impact, and timing.

Watch this video for a quick breakdown

RSUs: Windfall or Wealth Trap?

RSUs often feel like a bonus, until you realize that vesting triggers a taxable event whether you sell or not. If you miss your trading window, you may be left holding stock you didn’t plan to keep while facing a sizable tax bill.

This scenario leads many execs to an endless cycle of indecision:

• Should I sell now?
  
• What if earnings go up next quarter?
  
• What if I sell and miss a rally?
  

The market doesn’t wait, and neither does the IRS.

That’s where a 10b5-1 plan provides clarity. It replaces emotion with automation and ensures action even when your calendar or company policy locks you out.

Automating Diversification and Avoiding Risk

If this topic hits home, you will want to listen to my recent podcast with Adam Crawford from Candor. His platform helps executives automate RSU management by:

• Connecting to your RSU custodian
  
• Selling shares on your behalf
  
• Automatically reinvesting proceeds into a diversified portfolio

We discussed where automation creates real financial leverage, how to handle concentration risk, and why delegation often beats trying to time the market manually.

If you have ever felt RSU-rich but portfolio-poor, this conversation will change how you think about equity compensation.

What a Smart 10b5-1 Plan Actually Looks Like

Let’s bust the myth that 10b5-1 plans are inflexible. A smart plan is a custom strategy aligned to your cash flow, tax planning, and investment needs.

You control:

• How much stock is sold and how frequently
  
• Price floors to avoid selling at market lows
  
• Pacing to match cash needs and liquidity preferences
  
• Timing to pair with charitable deductions or capital loss harvesting
  

Think of it as reverse dollar-cost averaging. Instead of buying into the market gradually, you are selling out of your concentrated position in small, manageable chunks.

This not only manages your risk, but also shapes how your trades are viewed by colleagues, board members, and investors. One large dump could spark concerns. A steady, predictable cadence looks like professionalism and confidence.

How to Stagger Plans to Reduce Execution Risk

In 2023, the SEC banned overlapping 10b5-1 plans that allowed multiple trades in the same window. But that does not mean you are stuck with one long conveyor belt of trades.

Smart executives now stagger their 10b5-1 plans.

Here is how it works:

• Allocate 40 percent of your RSUs under a 12-month plan
  
• Once that ends, start a new plan for another 40 percent
  

This spreads out your trading activity across different windows, reducing your exposure to any single market downturn. It also avoids drawing attention to one large insider transaction.

By layering plans, you build rolling liquidity and smoother tax consequences. It is a way to stay agile without breaking compliance rules.

Making Sense of Your Equity Strategy

A 10b5-1 plan is one of the most effective tools to manage concentrated equity positions, but it should not be your entire strategy.

Most executives also deal with:

• Stock options
  
• Performance shares
  
• Deferred bonuses
  
• Carried interest
  
• Tax bracket volatility
  

Your approach should start with a few key questions:

• How much liquidity do I need over the next 1 to 5 years?
  
• How much of my portfolio is tied to one ticker?
  
• How do I reduce that risk without tanking my tax efficiency?
  

Once you know those answers, you can work with an advisor to build a custom rules-based plan. From there, automation takes over.

I have worked with executives who followed this process and watched their portfolios thrive. I have also seen people delay too long and lose seven figures to tax inefficiencies or market events.

Those who succeed take control early. They treat 10b5-1 plans not just as legal protection, but as a strategic edge.