Selling RSUs During an Earnings Blackout: The 10b5-1 Plan Path

A principal at a public cloud company vested 2,500 shares on November 15, 2025 at $220. Three days later the company entered its quarterly blackout period ahead of January 28 earnings. During the blackout, no insiders or access persons could trade company stock. The blackout ran until two full trading days after the earnings call, which meant the window closed on November 18 and reopened February 1. Between those dates, the stock ran from $220 to $285, then dropped to $195 after the earnings miss. The principal watched his concentrated position swing by $225,000 with no ability to act.

The 10b5-1 plan mechanism solves this by pre-committing the employee to a schedule of trades before they have material non-public information. Once the plan is in place, trades execute automatically regardless of whether the company is in a blackout. The employee loses the discretion to react to news, which is the point.

How corporate blackout periods work

Most public tech companies maintain a formal insider trading policy that designates certain employees as access persons. The list typically includes executives, board members, and any employee with recurring access to material non-public information. At a large tech company, the access-person list can run into the thousands.

Access persons are subject to two restrictions. The first is an affirmative duty not to trade while in possession of material non-public information, which is a federal rule under Section 10(b) of the Exchange Act and Rule 10b-5. The second is a prophylactic blackout imposed by company policy: no trading during the weeks surrounding earnings announcements, regardless of whether the individual actually knows anything material.

Typical blackout windows run from two weeks before the end of a fiscal quarter through two trading days after the earnings call. That is roughly six weeks every quarter. Combined with special blackouts around M&A, financing events, or other corporate news, access persons can be in blackout for 30 to 40% of the year.

The consequence for RSU holders

RSUs that vest during a blackout are still delivered. The company’s stock plan administrator processes the vest and delivers shares under whatever settlement mechanic applies. The newly vested shares sit in the brokerage account with zero ability for the employee to sell.

This is a cash flow and concentration problem. The tax on the vest is owed at the vest-date FMV. The shares cannot be monetized to fund the tax or reduce concentration until the window opens. If the window reopens at a lower price, the employee has paid tax on value that has since evaporated.

The 10b5-1 plan

Rule 10b5-1 under the Exchange Act provides an affirmative defense to insider trading liability. If an employee enters into a binding contract, instruction, or written plan to trade at a future time, and does so before they have material non-public information, trades made under that plan are protected even if the employee later acquires MNPI.

The SEC adopted amendments in 2023 tightening the rule. Key requirements now include a mandatory cooling-off period after adoption: at least 90 days for directors and officers, and shorter periods for other insiders. Good-faith adoption, meaning no attempt to evade the rules, is required. Only one plan at a time is permitted for most insiders, and the rule imposes certification requirements on directors and officers.

What the plan looks like in practice

A typical 10b5-1 plan for an RSU holder specifies a sell instruction keyed to vesting events. The plan might say: “On each vesting date, sell 100% of net-settled shares at the market price on the business day following vest, or at the first open-window trading day if the vest falls in a blackout.” That language removes discretion and schedules trades automatically.

More flexible plans can include price triggers, quantity caps, and scheduled sales independent of vesting. A plan might say: “Sell 500 shares on the 15th of each month if the market price exceeds $200, and sell an additional 1,000 shares on March 1, 2026 regardless of price.” Each instruction must be specific enough that the broker can execute without further input from the employee.

Opening a 10b5-1 plan

The process usually runs through the company’s stock plan administrator and its insider trading policy administrator. Steps include:

1. Confirm eligibility under the company’s insider trading policy.
2. Complete a questionnaire and certify that the employee has no MNPI at adoption.
3. Draft the plan terms with the broker, typically Fidelity, Morgan Stanley, or Charles Schwab.
4. Submit the plan to company legal for pre-approval.
5. Wait out the cooling-off period, typically 90 days for officers or 30 to 60 days for non-officers.
6. First trades execute under the plan.

The process takes four to eight weeks from start to first execution. Plans cannot be adopted during a blackout period; they must be adopted during an open window.

Amending or terminating the plan

The 2023 SEC amendments restrict amendments. Modifying the price, amount, or timing of scheduled transactions triggers a new cooling-off period. Terminating the plan in the middle of its term is permitted but may, under some interpretations, cast doubt on the good-faith requirement for trades that did execute. Most practitioners treat the plan as effectively irrevocable once it starts trading.

When a 10b5-1 plan is worth the effort

For an employee with $500,000 of annual RSU income at a volatile public company, the blackout problem produces real cost. Three cases where a plan pays for itself:

The employee is concentrated above 30% of liquid net worth in employer stock. Diversifying requires sales, and blackouts delay sales. A 10b5-1 plan delivers consistent monthly or quarterly sales that reduce concentration on a predictable schedule.

The employee plans to fund a home purchase or other large expense from employer stock. Timing the sale around a closing date is impossible if the closing falls in a blackout. A 10b5-1 plan keyed to a specific date removes the uncertainty.

The employee wants to harvest long-term capital gains on older vests while still at a low income bracket. Coordinating the sale with a specific tax year requires the ability to execute in December. A 10b5-1 plan schedules the December sale regardless of whether earnings timing puts that date in a blackout.

The automatic-execution drawback

A 10b5-1 plan trades discretion for predictability. The employee cannot react to a 40% rally, a 30% drop, or company-specific news. If the company beats earnings and the stock rallies, the scheduled sale executes at whatever price the market offers on the scheduled day. If the company misses and the stock drops, the scheduled sale still executes.

Some plans include price floors or price triggers. A plan might say “sell only if price exceeds $180.” This provides some reactive protection but introduces a risk that the trade simply does not happen and the employee remains concentrated.

Layering multiple plans

The 2023 amendments restrict most insiders to one plan at a time. This prevents the “multiple-plan strategy” of having one plan for scheduled monthly diversification and another for tax-year-end harvest. Employees who want multiple objectives must build them all into a single plan.

Tax treatment of sales under a 10b5-1 plan

Sales under a 10b5-1 plan are ordinary capital gain or loss transactions under IRC §1001. The cost basis is the vest-date FMV (for shares received from an RSU vest) or the exercise date FMV plus strike (for option shares). Holding period runs from the vest or exercise date.

A sale within one year of vest is short-term capital gain, taxed as ordinary income. A sale more than one year from vest is long-term, taxed at 0%, 15%, or 20% plus 3.8% NIIT. For employees selling immediately at vest, cost basis equals proceeds, so the tax on the sale transaction is near zero. The compensation was taxed as W-2 income at vest; the sale transaction reports a small gain or loss.

The wash-sale interaction

A sale of employer stock at a loss that is followed by a vest of the same security within 30 days may trigger the wash-sale rule under IRC §1091. The disallowed loss is added to the basis of the replacement shares. For employees with recurring vests, this can be a trap: selling a lot at a loss in December, followed by a January vest, defers the loss.

A well-drafted 10b5-1 plan accounts for this by scheduling loss sales to avoid the 30-day window around vests, or by recognizing that the wash-sale disallowance defers rather than eliminates the loss.

Frequently asked

Who needs a 10b5-1 plan versus just trading in the open window?

Anyone designated as an access person at a public company, with regular concentration in employer stock, should evaluate a plan. Non-access-person employees at large tech companies generally do not need one, though company policy may still impose blackouts on them.

How long does the plan have to run?

Typical plans run 12 to 24 months with specific trade schedules. Shorter plans are disfavored by the SEC guidance on good-faith adoption.

Can I sell anything outside the plan?

Only during open trading windows, and only in amounts not covered by the plan’s specific instructions. Most companies’ insider trading policies require pre-clearance for all insider trades, regardless of whether they are plan trades.

Does the plan apply to options exercises?

A 10b5-1 plan can govern option exercises if drafted to do so. The plan can specify “exercise and sell 1,000 NSOs on March 15, 2026 at any price above $50.” Exercise under a plan is an affirmative defense to insider trading liability in the same way a sale is.

What happens if I leave the company?

Most plans terminate automatically on separation. Pending instructions stop executing. Any unsold shares are subject to post-termination trading rules under the company’s insider policy.

Before you commit to a plan, review the schedule against your expected vests and your tax-year planning in the concentrated stock diversification calculator.