Your Company’s Equity Trading Policy
Most public companies maintain a securities trading policy, and if you receive RSUs, this policy applies to you. It explains when you are allowed to trade the company’s stock and under what conditions. You are subject to this policy whether or not you handle sensitive information in your daily role.
Understanding the policy is a core part of managing your equity responsibly. Violating it can lead to employment consequences, forced reversal of profits, and in severe cases, regulatory action.
Trading Windows: When You Are Permitted to Trade
A trading window is the period during which the company allows employees to trade stock. These windows usually open shortly after quarterly earnings are released to the public, once the market has had time to absorb the company’s financial results. A typical trading window opens a few days after earnings and remains open for several weeks.
It is important to remember that an open window is permission, not a recommendation. The window simply means you may trade, as long as you are not personally in possession of material non-public information.
What If Your RSUs Vest During a Blackout?
RSUs vest according to their schedule, not according to the company’s trading calendar. If a vest happens during a blackout, you will still receive the shares, but you usually may not sell them until the next trading window opens.
This timing mismatch is something many employees overlook. If your strategy requires selling soon after vesting, you must understand when your next available window occurs.
Blackout Periods: When Trading Is Prohibited
Blackout periods are the opposite of trading windows. Trading is not allowed.
Most blackout periods occur before quarterly earnings announcements, when the company has finalized results internally but has not yet released them publicly.
Companies can also impose event-driven blackout periods at any time. These may relate to potential M&A activity, regulatory updates, major customer wins or losses, or other material corporate events. You might be told that a blackout exists without being told why.
Insider Trading: The Federal Law You Must Understand
Beyond company policy, every employee of a public company is subject to insider trading laws, primarily SEC Rule 10b-5. Trading company stock while you possess material non-public information (MNPI) is illegal and can result in fines, civil penalties, or criminal prosecution.
What Counts as Material?
Information is material if a reasonable investor would consider it important. Examples often include: unannounced earnings or guidance, pending mergers or acquisitions, major customer wins or losses, executive leadership changes, or regulatory actions or approvals. Materiality is not always clear cut. When in doubt, ask Legal.
What Counts as Non-Public?
Information is non-public until it has been broadly released through official channels and the market has had time to absorb it. Internal awareness does not make information public.
Avoiding Tipping
Sharing MNPI with someone who then trades on it is called tipping, and both parties can be held liable. If you know something the market doesn’t, do not discuss it with anyone who might act on it.
Pre-Clearance Requirements
Some employees, particularly executives or those in sensitive functions, must obtain approval before trading. This can apply even during an open window. Legal or Compliance may deny pre-clearance at any time. If you are subject to pre-clearance, build extra time into your planning.
Rule 10b5-1 Plans: A Safe Harbor for Pre-Scheduled Trading
A 10b5-1 plan allows you to create a pre-scheduled trading program during a period when you have no MNPI. Once established, the trades occur automatically based on pre-defined rules. This structure may provide an affirmative defense if the plan is properly adopted and administered in good faith.
Key Requirements
- A mandatory cooling-off period before the first trade
- Restrictions on overlapping plans
- Limits on one-time trading plans
- Certifications affirming no MNPI at plan adoption
These plans should always be created with guidance from Legal and, ideally, a securities attorney.
Who Should Consider a 10b5-1 Plan?
They are most helpful for: executives with continuous access to MNPI, finance, strategy, and legal professionals, employees with large, recurring RSU vests, and anyone who faces frequent or extended blackout periods. For most employees, trading during open windows is sufficient.
Post-IPO Lock-Up Periods
Employees at newly public companies are typically subject to a lock-up period often around 180 days, but terms vary by IPO. During this time, you cannot sell your vested shares. Once the lock-up ends, regular trading rules still apply, including windows and blackout periods.
Private Company RSUs: The Liquidity Challenge
RSUs at private companies come with a different hurdle. There is no public market for the shares, so vested RSUs cannot be easily sold. Liquidity usually depends on an event such as an IPO, a company acquisition, a tender offer, or a secondary transaction facilitated by the company. The value is real, but unrealizable until liquidity becomes available. Your financial plan should reflect this reality.
