Blackout Period Explained: When Insiders Can't Trade (and the Other Kind of Blackout)

The term blackout period is used for two quite different things in investing. The one that matters most for tracking insider activity is the trading blackout, a window when company insiders are not allowed to buy or sell the company's stock. The other is a retirement-plan blackout, which restricts employees' 401(k) transactions. This article covers both, starting with the trading blackout.

The Trading Blackout

A trading blackout is a period, set by company policy, during which directors, officers, and certain employees may not trade the company's securities. The purpose is to reduce the risk of insiders trading while they hold material non-public information, most commonly the company's quarterly results before they're announced.

This is a company rule, not a statute. The law that matters is the prohibition on trading on material non-public information; the blackout is a prophylactic policy that helps companies stay clear of that line. See what an insider trading policy is.

When It Typically Runs

Policies differ, but a common pattern is:

• Starts: a few weeks before the end of each fiscal quarter (often around two weeks before quarter-end).
• Ends: after the earnings release has been public for a set time, often one to two full trading days after the announcement.

So for a calendar-year company, blackouts commonly span much of the last two weeks of March, June, September, and December through a day or two after earnings come out. The open window is the remaining stretch of weeks, called the trading window.

Companies can also impose special blackouts at any time, for example ahead of a pending merger, a large financing, or any other material event.

Who It Covers

Typically:

• Directors and executive officers.
• Employees with regular access to financial results (finance, legal, investor relations).
• Sometimes family members and entities those people control.
• People involved in a specific confidential project, for a special blackout.

What's Restricted

Usually any trading in the company's own securities, including options and hedging. Some policies also restrict gifts of stock and transfers into accounts, and some permit specific exceptions such as automatic dividend reinvestment.

How 10b5-1 Plans Fit

A 10b5-1 trading plan lets an insider set up trades in advance, when they're not aware of material non-public information. Trades under a valid plan can proceed during a blackout, because the decision was made earlier. That's one reason insider sales can show up on Form 4 filings even in quiet periods.

The SEC tightened the rules for these plans in 2022–2023, adding cooling-off periods before trading can begin and other requirements. Check current rules for specifics.

What Blackouts Mean for Reading Insider Data

If you track insider trades, blackouts shape the pattern you see:

• Clustering after earnings. Open-window buying and selling tends to bunch up in the weeks after results are released, when the window reopens.
• Quiet before earnings. Few discretionary insider trades in the weeks before a report.
• Sales during blackouts are usually pre-scheduled plan trades.

This is a pattern in timing, not a signal about direction. See how to read an insider trading tracker.

The Other Blackout: Retirement Plans

Under the Sarbanes-Oxley Act and SEC Regulation BTR, a pension or 401(k) blackout period is a stretch of more than three consecutive business days when a significant share of participants are barred from changing investments or taking distributions, typically during a recordkeeper change or plan merger. Companies must generally give participants at least 30 days' advance notice.

During such a blackout, directors and executive officers are also generally prohibited from trading the company's stock acquired in connection with their service. It's a separate rule from the earnings-driven trading blackout.

What to Take Away

• A trading blackout is a company-set window, usually around earnings, when insiders can't trade.
• It's a precaution against trading on non-public information, not a law in itself.
• 10b5-1 plan trades can still occur during it.
• A retirement-plan blackout is a different, rules-based restriction on 401(k) activity.

This article is for educational purposes only and is not legal or investment advice. Policies vary by company.