SEC Rule 10b5-1

SEC Rule 10b5-1, codified at 17 C.F.R. 240.10b5-1, is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5.

Different courts of appeals had come to different conclusions about what constituted insider trading under Rule 10b-5 — specifically, whether someone could be held liable for insider trading simply by trading while in possession of inside information, or whether a trier of fact must find that the person actually used that inside information when making the trade.

Paragraph (a) of the Rule essentially repeats the holding of the United States Supreme Court in United States v. O'Hagan,521 U.S. 642 (1997), which defines insider trading under the misappropriation theory. It states, in full, that

Paragraph (b) addresses the unsettled "possession" versus "use" issue, stating that a person violates Rule 10b-5 simply by trading while in "possession" of inside information. It states, in full, that

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