Section 16 Officer vs Non-Officer 10b5-1 Plan Differences

Most 10b5-1 discussion focuses on Section 16 officers and directors. The 2023 amendments layered the strictest requirements on this group: 90-day cooling-off, good-faith certification, Item 408(a) disclosure. But the rule covers more than just Section 16 officers. Non-officer employees with access to MNPI also adopt 10b5-1 plans, and the amendments applied lighter-but-not-empty requirements to them.

Understanding the split matters because the plan-design decisions, timing, and disclosure implications differ in ways that affect both the individual’s affirmative-defense position and the company’s governance posture.

This article lays out the differences between Section 16 and non-officer 10b5-1 plans.

Who qualifies as a Section 16 officer

Section 16 of the Securities Exchange Act covers:

• Directors of the issuer
• Named executive officers (NEOs, typically the top 5 paid per proxy rules)
• Other officers performing policy-making functions (CEO, CFO, GC, principal accounting officer, and others designated by the board)
• Beneficial owners of more than 10% of any class of equity securities

The company designates Section 16 officers annually, usually at the beginning of the fiscal year or at role changes. Designation matters: if you are a Section 16 officer, the strictest 10b5-1 rules apply.

Key differences at a glance

Requirement	Section 16	Non-officer
Cooling-off period	90 days, or 2 business days after 10-Q/10-K (capped at 120)	30 days
Good-faith certification	Required, written, in plan	Not required in writing, but good-faith standard still applies
Item 408(a) disclosure	Required	Not required
Single-plan-at-a-time rule	Applies	Applies
Single-trade-plan limit (one per 12 months)	Applies	Applies
Sell-to-cover exception	Applies	Applies

Cooling-off: 90 days vs 30 days

Section 16: 90 or 120 days

Rule 10b5-1(c)(1)(ii)(B)(1) applies the longer of (i) 90 days, or (ii) 2 business days after disclosure of the quarterly results (10-Q or 10-K) for the quarter in which the plan was adopted. Capped at 120 days.

A Section 16 officer adopting a plan in mid-March typically cannot trade before mid-June. If adoption is late in a quarter, the 10-Q-based branch can push the first-trade date further.

Non-officer: 30 days

Rule 10b5-1(c)(1)(ii)(B)(2) requires only 30 days. A non-officer adopting on March 15 can first trade on April 15.

Why the difference

Section 16 officers and directors have broader and more consistent access to MNPI. They sit at the decision tables where material information is generated. The longer cooling-off reflects the higher baseline risk that their adoption coincided with possession of MNPI.

Non-officers have more varied MNPI exposure. Some have extensive access (heads of finance, M&A team members); others have very little. The 30-day rule is a floor that captures a minimum safeguard without over-burdening the broader employee population.

Good-faith certification: written vs implicit

Section 16: written certification

Rule 10b5-1(c)(1)(ii)(C) requires officers and directors to certify in writing in the plan documents that:

1. They are not aware of MNPI about the issuer or its securities
2. They are adopting the plan in good faith and not as part of a plan to evade Rule 10b-5

The certification must be in the plan documents and is discoverable in later enforcement or litigation.

Non-officer: implicit good-faith standard

The rule does not require a written certification from non-officers. However, the good-faith-adoption-and-no-MNPI elements of the affirmative defense still apply. Non-officers need to adopt during an open window without MNPI to rely on the defense, but they don’t sign a formal certification.

Practical effect

Company policies usually require non-officers to adopt plans only during open windows and to confirm absence of MNPI through the company’s standard pre-trade review process. The formal written certification is a Section 16 creation, but good-faith adoption is an across-the-board requirement.

Disclosure: Item 408(a)

Section 16: full disclosure

Public companies must disclose in 10-Q/10-K filings each plan adopted, modified, or terminated by a Section 16 officer or director during the quarter. The filing includes names, dates, aggregate securities, and a checkbox confirming the plan satisfies Rule 10b5-1(c)(1).

This is a significant public-disclosure burden. Every plan change is part of the public record. Observers, including short-sellers and activist investors, track filings.

Non-officer: no public disclosure

Non-officer plans are not subject to Item 408(a). The existence of a non-officer plan is typically known only to the company, the broker, and the employee.

Why the difference

Section 16 disclosure is a long-standing governance principle: investors should know the trading patterns of leadership. Extending the disclosure to non-officers was considered but not adopted. The SEC decided the benefit did not justify the burden for rank-and-file trading.

Single-plan rule: applies to both

Both Section 16 and non-officer 10b5-1 plans are subject to Rule 10b5-1(c)(1)(ii)(D): one plan at a time, with the explicit exceptions for sell-to-cover and single-trade-plan (one per 12 months).

Non-officers cannot avoid the single-plan rule by virtue of their lesser status. If a non-officer wants a 10b5-1 defense, the same structural rules apply.

Single-trade plan limit: applies to both

Both groups are limited to one single-trade plan per 12-month period. Non-officers who might occasionally want to sell in a single event-triggered trade face the same constraint.

Sell-to-cover exception: applies to both

Both groups benefit from the sell-to-cover exception. A non-officer can run a sell-to-cover-for-vesting arrangement alongside a discretionary plan without violating the single-plan rule.

Officer changes: what happens at promotion

Promotion to Section 16

If a non-officer with an existing 30-day-cooling-off plan is promoted to Section 16 officer, the existing plan continues under its original terms. Modifications post-promotion would require the 90-day rule to apply to the modification.

Companies sometimes require executives promoted to Section 16 status to refresh their plans with full certification and 90-day cooling-off.

Demotion or transition out of Section 16

If a Section 16 officer transitions to a non-officer role (not common, but happens in restructuring), existing plans continue. Future plans could adopt under the 30-day rule.

Departure from the company

Plans typically terminate automatically on departure per plan terms. If the plan continues, the former officer’s status shifts, but they may still be subject to trading restrictions under company policy (e.g., former-employee blackouts).

Practical implications

For Section 16 officers

• Plan long: cooling-off plus plan duration can mean 12-24 months of committed trading terms
• Adopt in the cleansing window: post-10-Q/10-K filing
• Document everything: MNPI interview, certification, approval process
• Coordinate with IR/PR: Item 408(a) disclosure requires messaging preparation
• Avoid modifications: each one restarts 90-day cooling-off

For non-officers

• 30-day cooling-off is easier to plan around
• No public filing burden (lower optics risk)
• Still need good-faith adoption during open window
• Same single-plan rule applies
• Sell-to-cover exception works the same way

Why non-officers might still plan

Significant equity holders with MNPI access

A head of finance, head of corporate development, or senior engineer with access to material technical roadmaps has MNPI exposure. A 10b5-1 plan protects routine diversification trading from after-the-fact MNPI allegations.

Executives without Section 16 designation

Some senior leaders are not Section 16 officers but have substantial equity. A plan protects their trading in the same way.

Structured retirement timing

Employees approaching retirement may want regular, predictable share sales without the blackout-window constraints of normal trading. A plan provides that predictability.

Frequently asked

Can a 10% holder who is not an officer or director use the 30-day rule?

10% beneficial owners are captured under Section 16 for reporting purposes, but the cooling-off rule in Rule 10b5-1(c)(1)(ii)(B)(1) applies specifically to officers and directors. 10% holders who are not officers or directors use the 30-day rule. Confirm with counsel, as this can be fact-specific.

Do advisory-board members count as Section 16?

Typically no. Advisory-board members without voting authority are not directors for Section 16 purposes. Confirm their status with the company’s compliance team.

Can a non-officer write up a voluntary certification?

Nothing prevents a non-officer from signing a certification similar to the Section 16 template. This does not create extra legal protection but does create contemporaneous good-faith evidence that can help if the plan is later scrutinized.

Do spouses of Section 16 officers fall under the rule?

Spousal trades may be attributed to the Section 16 officer under specific circumstances. The plan itself is the officer’s; the spouse’s trading arrangements are separate. Consult counsel if this arises.

Does the 30-day rule apply to employees who are not in the blackout system at all?

The 10b5-1 defense is available to anyone, but the cooling-off periods in (c)(1)(ii)(B) apply to plan adopters by an individual capacity. A non-officer, non-director, non-10%-holder adopting a plan faces the 30-day minimum.

What about Section 16 officers at subsidiaries?

If the subsidiary is publicly traded, its Section 16 officers face the 90-day rule for that subsidiary’s securities. Parent-company Section 16 status applies to parent-company securities.

Next step

Confirm with your general counsel or compliance team whether you are classified as a Section 16 officer. If yes, plan for 90-day cooling-off and full Item 408(a) disclosure. If no, plan for 30-day cooling-off and lighter disclosure. The plan-design choices (fixed-share, limit-price, combination) apply similarly in both cases; the administrative and timing differences are where the split matters most.