What is a Blackout Period (Investment Plans)?

A blackout period can be a period of three successive business days or a period not above 60 days that disallows employees from altering their already-made investment or retirement plans. During a blackout period, no modification, correction or alteration is permitted to be made on contract terms, investment policies, retirement plans among others. Many companies adopt a blackout period when certain decisions, plans, restructuring and changes are to be made. The blackout allows the company carry out the task without any interference from the employees. Since this period prohibits access or modification from majority of the employees, it is import that a notice be given prior to this time.

What is the Purpose of a Blackout Period?

Blackouts periods are not just embarked on by companies, there are certain rules guiding blackout that must be followed by organizations. Most public companies undergo blackout periods to prevent insiders trading or exchange securities. In a bid to protect employees from being underprivileged during blackout periods, the Securities and Exchange Commission (SEC) establish certain rules that guide blackout periods. During this period, directors and executive officers are prohibited from selling or transferring securities. Also, notification must be given to the director and employees by the issuer of blackout period prior to the selected date. Insider trading is also illegal during this period, this is to prevent certain persons from enjoying an unjust advantage over others.