A company trading blackout generally restricts transactions in employer securities. Other assets may remain available for transactions, subject to applicable account and plan restrictions. Cash can still come from a taxable account, a securities-based line of credit against non-employer assets, or a 10b5-1 Trading Plan already running when the window closes. Starting a new 10b5-1 Trading Plan during a blackout period will not produce liquidity during that same period, because a cooling-off period follows adoption.
What Does a Blackout Period Actually Restrict?
A blackout period generally restricts transactions in employer securities, while other holdings may remain available depending on the applicable restrictions. You can still sell a diversified mutual fund or an exchange-traded fund in a taxable brokerage account. Stock in another company works the same way. None of those counts as a transaction in company securities. Non-employer investments, including bonds and money market funds, may not be subject to the employer-stock trading restriction. Transactions involving assets inside a 401(k), however, remain subject to the plan’s rules and any separate restrictions.
Restrictions during a blackout window mainly affect discretionary trading, which often involves:
- Open-market sales of company stock.
- Option exercises that include a same-day sale.
- Gifts of company shares, at some issuers.
- Transfers into or out of a company stock fund inside a 401(k).
Your company insider trading policy controls the details. Public companies generally file their insider trading policies as Exhibit 19 to their annual reports on Form 10-K. Our post on where to read your company insider trading policy covers how you can access these details for your own situation. Scope varies by issuer.
Does a 10b5-1 Trading Plan Work During a Blackout Period?
A properly established 10b5-1 Trading Plan may continue executing scheduled transactions during a blackout period, provided the plan remains effective and those transactions are permitted under the applicable requirements and company policy. The plans allow insiders to sell on instructions set in advance, before potentially obtaining material nonpublic information. Discretionary trades are prohibited inside the blackout periods, though many insider trading policies permit 10b5-1 scheduled trades during blackouts. This provision is generally detailed in Exhibit 19 of the policy text.
Adopting a new 10b5-1 Trading Plan is generally not an immediate liquidity solution because applicable adoption requirements and cooling-off periods can delay the first trade. Rule 10b5-1 conditions the affirmative defense on adoption at a time when the insider knows no material nonpublic information. Company policies commonly add two conditions: adoption during an open window, and pre-clearance from a compliance officer.
A cooling-off period then runs before the first trade. Under the amendments the SEC adopted in December 2022, directors and Section 16 officers face two clocks. One runs 90 days from adoption. The other ends two business days after the Form 10-Q or Form 10-K covering that quarter. The later clock governs, capped at 120 days after adoption. All other persons wait 30 days. Our post on 10b5-1 plans and selling company stock covers the certification and the overlapping-plan limits.
Can I Borrow Against My Stock for Liquidity During a Blackout Period?
Borrowing during a blackout period is generally permitted when collateral is something other than employer stock. Pledging securities held inside a personal brokerage account generally does not count as a transaction in company securities, and many lenders offer securities-based lines of credit against index funds, bonds, or shares of publicly traded companies.
Pledging company stock raises a separate question. Many insider trading policies restrict the practice or prohibit it outright. Where a policy permits pledging, the general counsel’s office usually requires pre-clearance. Approval to pledge company stock is distinct from any approval to sell. Pledging rules sit in the Exhibit 19 policy text. Companies disclose hedging policy separately, in the annual proxy statement under Item 407(i) of Regulation S-K.
A line of credit against a concentrated position carries one specific risk while the window sits closed. A sufficiently large decline in the value of pledged securities may trigger a collateral call. The challenge in this case is that the shares you would normally sell to meet the collateral call are the same shares restricted by the blackout period. The borrower may need to provide additional collateral or funds to address the call. Our post on borrowing against stock covers interest cost, repayment horizon, and collateral mix.
Can I Request a Hardship Exception to Sell During a Blackout Period?
Many companies allow hardship exceptions, and the general counsel’s office or the compliance officer may permit exceptions on a case-by-case basis. When requesting a hardship exemption, submit a written pre-clearance request covering the amount, the timing, and the reason for the sale. Though a trade during a blackout period may be permitted in a one-off case, it does not satisfy Rule 144, Section 16, or any other federal requirement on the same transaction.
No exception reaches anyone who knows material nonpublic information, whatever the hardship. A company can waive its own window. A company cannot waive Rule 10b-5. Awareness of material nonpublic information will disqualify your hardship exemption without exception.
Reporting obligations attach as usual once a company clears the sale. A director or Section 16 officer reports the transaction on a Form 4 within 2 business days. An affiliate selling under Rule 144 still faces a volume limit. The cap is the greater of two figures. One is 1% of the outstanding shares of that class. The other is the average weekly reported trading volume during the 4 calendar weeks before the Form 144 filing. Our post on what your insider trading policy restricts covers exceptions and pre-clearance in more detail.
Is a Pension Blackout the Same Thing as a Trading Window Blackout?
No. A pension plan blackout under Section 306(a) of the Sarbanes-Oxley Act of 2002 is a separate restriction. The two can run at the same time. Section 306(a) bars directors and executive officers from buying, selling, or transferring equity securities of the issuer. The bar covers shares that came to the person through service or employment in that role. It lasts for the duration of the pension plan blackout. The SEC implemented the provision through Regulation BTR, effective January 26, 2003.
The regulation defines the trigger. A Section 306(a) blackout period runs more than three consecutive business days. During pension blackouts, the issuer or a plan fiduciary suspends trading in issuer equity securities inside individual account plans. The suspension has to reach at least 50% of participants or beneficiaries in the United States. Recordkeeper changes and plan mergers are typical causes.
Advance notice applies. The issuer notifies its directors and executive officers within 5 business days of the plan administrator’s notice. Absent that administrator notice, the issuer gives its own at least 15 calendar days before the blackout starts. The issuer files the same notice with the SEC on Form 8-K. Regulation BTR exempts trades under an arrangement meeting the conditions of Rule 10b5-1(c). The exemption holds only if the insider neither started nor changed that arrangement during the blackout. The same applies to any period when the insider knew the blackout’s approximate dates.
What Prevents the Same Problem at the Next Blackout Period?
Two actions may reduce the likelihood that a liquidity need coincides with a future blackout period. First, adopting a 10b5-1 Trading Plan in the next open window. Then, sizing cash reserves in accordance with trading windows rather than your monthly budget.
Adopting a 10b5-1 plan during an open window turns the cooling-off period into a scheduling input. Counting backward is the exercise. A director or Section 16 officer needs proceeds on a given date. That person works back from the end of the cooling-off period, up to 120 days after adoption. All other people count back 30 days. Adopting a plan early allows for sales to land ahead of the liquidity needs.
Accounting for fixed obligations, estimated tax payments, and known one-time expenses through the next two open windows can reduce the pressure to transact during a closed trading window. Our post on what to do before a stock trading blackout period covers timing work ahead of a window close. Our post on accessing liquidity from concentrated stock covers a wider set of sources.
Spectrum Asset Management works with executives at publicly traded companies in Orange County. We coordinate liquidity, concentration, and taxes across the trading window calendar. Contact Spectrum Asset Management to review a specific position.
By Garrett Peterson, Wealth Advisor | Spectrum Asset Management | Reviewed October 2026
Disclaimer: This material is for informational and educational purposes only and should not be construed as investment, legal, or tax advice, or as a recommendation of any specific security or strategy. All investing involves risk, including the potential loss of principal. Borrowing against securities involves interest cost, collateral maintenance requirements, and the risk of forced liquidation, and may be prohibited by company policy. Consult your financial, legal, and tax professionals regarding your personal circumstances. Nothing herein constitutes an offer to enter into an advisory relationship. Spectrum Asset Management, Inc. (SAM) is an SEC-registered investment adviser headquartered in Newport Beach, California. SAM is not affiliated with any other firm using a similar name.
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