Ninety Days After Adoption Is Not When a 10b5-1 Plan May First Trade

Two Readings of the Same Ninety Days

The short version of the 2022 amendments to Rule 10b5-1 is one figure: directors and officers sit through a ninety-day cooling-off period before a newly adopted plan may execute. The figure is accurate, and for a large share of adoptions it is not the operative date. Ninety days is only the first of two prongs, the rule takes the later of them, and a parenthetical in the same sentence caps the result at 120 days. Three numbers, one sentence, and they do not compose the way a reader expects.

The interesting case is a plan adopted in the first days of a fiscal quarter. There the second prong points at a report four months out, so the comparison would push trading past day 120 and the ceiling truncates it. The period expires on a date at which the first prong is satisfied, the second is not, and the rule is finished with the question anyway. That is the number this piece follows: ninety, as written, against the first date a plan may trade.

The Codified Text Puts a Ceiling on Its Own Test

Start with the operative language. Under the Electronic Code of Federal Regulations, 17 CFR 240.10b5-1, paragraph (c)(1)(ii)(B)(1) provides that where the person adopting the plan is a director or officer as defined in Rule 16a-1(f), "no purchases or sales occur until expiration of a cooling-off period consisting of the later of: (i) Ninety days after the adoption of the contract, instruction, or plan or (ii) Two business days following the disclosure of the issuer's financial results in a Form 10-Q ... or Form 10-K ... for the completed fiscal quarter in which the plan was adopted ... (but, in any event, this required cooling-off period is subject to a maximum of 120 days after adoption of the contract, instruction, or plan)".

The ellipses cover the citations and the parallel foreign-private-issuer branch. Four things do the work. "The later of" is a choice between two dates, not a sum. Prong (ii) is keyed to a filing, not an earnings release. "Completed" means prong (ii) cannot be satisfied until the quarter of adoption has ended. And the parenthetical is a hard ceiling in calendar days from adoption.

That adjective matters, because the preamble does not carry it. In the release published by the U.S. Government Publishing Office, Federal Register, Insider Trading Arrangements and Related Disclosures (87 FR 80362), the Commission describes the second prong as running to the report "for the fiscal quarter in which the plan was adopted". The codified text says "completed fiscal quarter". Work from the summary and you can talk yourself into treating a mid-quarter release of the prior quarter as the trigger. It is not. The Commission also "disagree[d] with commenters who suggested that there cannot be material nonpublic information contained in a Form 10-Q or similar filing when the issuer has already announced its earnings results". Prong (ii) is a filing date for the quarter containing the adoption, and that quarter has to end first.

One Adoption Date, Carried Through the Calendar

Take one case all the way. A director of a large accelerated filer with a December 31 fiscal year end adopts a plan on Monday, July 6, 2026, the first Monday of the third fiscal quarter. Prong (i) is mechanical: ninety calendar days later is Sunday, October 4, 2026.

Prong (ii) needs a filing deadline. The quarter of adoption completes Wednesday, September 30, 2026. General Instruction A.1 to the U.S. Securities and Exchange Commission Form 10-Q sets the period after quarter end as "40 days ... for large accelerated filers and accelerated filers (as defined in 17 CFR § 240.12b-2); and b. 45 days ... for all other registrants". Forty days after September 30, 2026 is Monday, November 9, 2026, a business day, so no weekend roll is needed. Two business days after a filing made on the deadline lands on Wednesday, November 11, 2026. The prongs therefore give October 4 and, at the latest the issuer's deadline permits, November 11, and "the later of" would select November 11, day 128 after adoption.

Now the ceiling. One hundred twenty days after July 6, 2026 is Tuesday, November 3, 2026, six days before the Form 10-Q named by prong (ii) is even due. The required cooling-off period therefore expires November 3, 2026, with prong (ii) still unsatisfied and, from that date, no longer binding.

Footnote 103 Answers the Question the Rule Text Raises

A reader could object that this is incoherent: the rule bars trading until the later of two events, and here the later event falls outside the ceiling. Does the ceiling release the plan, or cap only the ninety-day leg? The parenthetical points one way, since "this required cooling-off period" is the whole period and not the first leg, but the case is worked through in a footnote to the preamble sentence that introduces the two prongs, and there it is unambiguous. Footnote 103 of the release reads: "If financial results are disclosed more than 120 days after adoption of the plan, 120 days would be the maximum duration of the required cooling-off period. In those circumstances, we agree with commenters who asserted that a 120-day cooling-off period would be an appropriate duration to better ensure that a corporate insider would not benefit from material nonpublic information related to earnings. See, e.g., letters from AFL-CIO, and CII. The final rule would not foreclose issuers that may choose to impose a longer cooling-off period."

So the Commission contemplated this case and chose the ceiling deliberately. One hundred twenty days is the maximum duration of the required period, so the filing prong does not survive the cap. The last sentence is the one to keep: the rule sets a floor on issuer conduct, not a ceiling. A company policy may impose a longer wait, so only the regulatory answer is computable from filings.

Three Zones Inside One Quarter

Once the ceiling is understood as binding, the ninety-day figure becomes a piecewise answer. Hold the quarter fixed at the third quarter of 2026, same filer and same November 9, 2026 deadline so prong (ii) resolves to November 11, 2026, and vary only the adoption date.

A plan adopted July 14, 2026 reaches day 120 on exactly November 11, 2026, so any adoption from July 1 through July 13 hits the ceiling before prong (ii) resolves and the ceiling governs. A plan adopted August 13, 2026 reaches day 90 on exactly November 11, 2026, so any adoption from August 14 through September 30 has a ninety-day date after the filing prong and prong (i) governs. Between those dates the filing prong is the latest of the three, producing an effective wait between 90 and 120 days.

Only the last zone, roughly the back half of the quarter, delivers an actual ninety-day wait. Adopt in the first fortnight and the wait is 120 days whatever the issuer does; adopt in the middle and it is set by the issuer's reporting calendar rather than the insider's timing.

The boundaries move with the issuer. A non-accelerated filer gets forty-five days, widening the ceiling-governed zone; an issuer that files early narrows it. A notification of late filing shifts prong (ii) later again without moving the ceiling, and the mechanics are covered in an earlier piece on how a notification of late filing buys five calendar days. That asymmetry is the point: the ceiling runs from adoption and is indifferent to every filing decision the issuer makes.

Who the Ninety Days Binds

The two-prong test with the ceiling applies only to directors and officers. Paragraph (c)(1)(ii)(B)(2) handles everyone else: for a person who is not the issuer and not a director or officer, "no purchases or sales occur until the expiration of a cooling-off period that is 30 days after the adoption of the contract, instruction or plan". Flat thirty days, one prong, no filing reference, no ceiling.

Which side of the line a person falls on is set by the Electronic Code of Federal Regulations, 17 CFR 240.16a-1, paragraph (f); it is broader than a title check. Beyond the president and the principal financial and accounting officers, "officer" reaches "any vice-president of the issuer in charge of a principal business unit, division or function ..., any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the issuer", and officers of a parent or subsidiary count if they perform such functions for the issuer.

A third category is left out by decision, not oversight. Clause (B)(1) reaches directors and officers, clause (B)(2) persons who are neither the issuer nor a director or officer. Neither reaches the issuer, and the release says why: the Commission was "not adopting a cooling-off period for the issuer at this time" pending "further consideration". So an issuer's own plan carries no cooling-off period under this condition.

One more trap sits in paragraph (c)(1)(iv): "Any modification or change to the amount, price, or timing of the purchase or sale of the securities underlying a contract, instruction, or written plan ... is a termination of such contract, instruction, or written plan, and the adoption of a new contract, instruction, or written plan." A modification is a fresh adoption, so the clock restarts from that date and runs through the same three zones.

The Disclosure Arrives After the Clock Has Run

All of this is computable by an outsider, but only once the adoption date is public, and that comes from Item 408 of Regulation S-K. Under the Electronic Code of Federal Regulations, 17 CFR 229.408, paragraph (a)(1) requires disclosure of whether, "during the registrant's last fiscal quarter ..., any director or officer ... adopted or terminated" a Rule 10b5-1 trading arrangement. Paragraph (a)(2) requires the material terms "other than terms with respect to the price at which the individual executing the Rule 10b5-1 trading arrangement ... is authorized to trade", and the enumerated terms include "[t]he date on which the director or officer adopted or terminated the trading arrangement", the duration, and the aggregate number of securities.

The adoption date is disclosed; the price terms are not. So an outside reader can bound the earliest date a plan may trade, and its size, but learns nothing about the prices at which it will hit the tape.

The timing cuts the wrong way, though. Item 408(a) is a last-fiscal-quarter disclosure, so a July 6, 2026 adoption surfaces in the third-quarter Form 10-Q, due November 9, 2026. The cooling-off period on that plan expired November 3, 2026. The row that tells you the plan exists is published after the plan was already free to trade.

This is the same mistake as reading a quarter-end position report as a current holding, discussed in an earlier piece on reading a quarterly snapshot as a snapshot rather than a current position. The Item 408(a) table is retrospective by construction: it tells you what the quarter contained, not what is live today.

Concrete Framework

Classify the person first. A director, or an officer inside the Rule 16a-1(f) definition, gets the two-prong-plus-ceiling test; anyone else gets adoption plus thirty days. Then read the adoption date off the Item 408(a) row, treating any disclosed modification date as a new adoption date under paragraph (c)(1)(iv).

Compute three candidates. A is adoption plus ninety calendar days. C is adoption plus 120 calendar days. B is two business days after the Form 10-Q or 10-K covering the completed fiscal quarter that contains the adoption date, using the cover page filer status and the forty or forty-five day instruction for the deadline, then the actual filing date once it exists.

Take the later of A and B, then apply C as a hard ceiling: the expiry is min(max(A, B), C). Written that way it is obvious that the answer is ninety days only when B falls on or before A, that B governs when B sits between A and C, and that C wins outright when the adoption sits early enough in the quarter.

Then check direction. A later filing never delays the expiry past C, and an earlier filing only pulls B forward, which only makes A bind. So C is the latest possible expiry and adoption plus ninety days the earliest, and both bounds hold without knowing the filing date at all. That pair is what to carry.

Finally, treat the computed expiry as a regulatory floor. Footnote 103 says the rule "would not foreclose issuers that may choose to impose a longer cooling-off period", and a company's own policy is generally not in the filings. Expect sales no earlier than your date; do not expect them on it.

What Would Invalidate This

The day-counting convention. I have treated day 120 after a July 6, 2026 adoption as November 3, 2026. Whether a trade may occur on November 3 or only from November 4 turns on whether the period counts from the day after adoption, and the codified text spells out no convention I could verify from the sources I read. Every date here is accurate to within one day at the boundary, and the three-zone structure is unaffected because both boundaries were computed the same way.

The meaning of "two business days". Prong (ii) is the only leg measured in business days, and I found no definition in the rule and none in the portion of the release I could retrieve. So I anchored the conclusion on the November 9, 2026 filing deadline, a pure calendar computation, rather than the November 11, 2026 resolution of prong (ii). That conclusion survives any reading of "business day", because November 3 precedes even the filing date. The zone boundaries do not: read off November 11, they move with any later reading of prong (ii).

A different filer status. The forty-day deadline covers large accelerated and accelerated filers; a non-accelerated filer gets forty-five days, pushing prong (ii) later and moving the July 14 boundary earlier. Read the cover page rather than assuming.

A fourth-quarter adoption. There is no Form 10-Q for the fourth quarter at all: General Instruction A.1 says "no report need be filed for the fourth quarter of any fiscal year". Prong (ii) then points at the Form 10-K, whose deadline is far longer than forty days, so the ceiling binds across a wider range of adoption dates. The analysis above understates how often 120 days governs.

A foreign private issuer, where prong (ii) runs to a Form 20-F or Form 6-K and the reporting calendar is not the one used here. Or an amendment: everything above reads the rule as currently codified. If it changes, the ceiling is the first thing to re-read, because it is the piece of the sentence that does the most work and gets quoted the least.