Ask HN: Should I quit my job to sell my stock options?

Disclaimer I am not providing legal or financial advice here I'm not qualified to do so.

However you might want to talk to somebody about setting up a 10b5 plan or talk to somebody knowledgeable to see if it would even make sense. My understanding is these plans are created exactly to avoid the situation that you're in where you want to sell some of your equity but you might hold insider information.

The way it basically works is that you can set rules as to when you want to sell your stock but in the future. For example you might say 6 months from now as long as the stock is over $50 sell it.

The fact that you are establishing the rules in which a sale would execute means that you would not know what the stock price was going to be 6 months from now. Since it's all set way in the future you shouldn't be accused be accused of insider trading, you would have no idea where the stock is going to be in 6 months.

This is how many high level executives sell their equity since they would always have insider information.

When nice thing about this is I think you can even sell during a blackout.

The downside is that you lose the flexibility if the stock was to pop up 200% tomorrow you couldn't sell it since you would not be able to sell on the open market you would be selling through your plan.

Again I've never used one of these so I might not have it correct but I think it's worth talking to somebody about whether this would solve your problem.

https://www.investopedia.com/terms/r/rule-10b5-1.asp

Seconding this advice, I was an early FB employee and we were instructed in 10b5-1 plans for this very reason.

Also, get an attorney. TODAY! Don't even log into your broker until you do. (Joking, but not really.) This is the aspect of your professional life most likely to ruin you and send you to prison if you mess it up. Pleading ignorance to the judge will not save you.

There are also tax-favorable trades you can do, e.g. if you want to donate some of your wealth to charity there are better ways than cash (for both parties). An attorney can advise you and possibly save you many times their fee.

> However you might want to talk to somebody about setting up a 10b5 plan or talk to somebody knowledgeable to see if it would even make sense. My understanding is these plans are created exactly to avoid the situation that you're in where you want to sell some of your equity but you might hold insider information.

The thing is, if your company has trading windows, you may have to set up (or at least, finalize) the plan during a window and also when you don't hold insider knowledge; but OP has been on notice about holding insider knowledge during the last several trading windows.

It might behoove OP to schedule a vacation/leave leading up to the next window?

C-Level executives and others regularly use these plans. They are designed for the use case of 'people who nearly always have MNPI'. The way it's done typically is 2-fold. 1) Immediately after a quarterly earnings release when the amount of MNPI is at it's lowest amount. 2) Far enough in the future that the value of your MNPI is minimized - ie, deals you know of could be public or even collapsed by the time you're selling.

You won't need a leave. But you will need a Lawyer, as noted in other comments. GET A LAWYER FOR THIS ASAP SERIOUSLY.

1. Get attorney 2. Many corporate executives can sell, and you are not the exception. This is done by pre announcing sale of your holdings. Why in the world would that be an issue? They can’t make you hold any stock and you should definitely diversify if you haven’t already

Besides pre announcing your sale, if you are relatively comfortable with the company's future trajectory, you can also consider getting a margin loan backed by the shares rather than selling them.

However overall, having substantially all of your net worth and also your paycheck dependent on the performance of your employer is pretty risky and you are likely better off diversifying.

Most places that have trading windows also have rules against taking margin loans against your shares.

If legal is telling you verbally and its not in your employment agreement, then do whatever you want starting with consulting an actual attorney rather than reading unqualified opinions on the internet.

> its not in your employment agreement

My employment agreement doesn’t say anything about murder or robbery on it. Does that mean I can kill that guy I don’t like and take his stuff?

No? Right, because my employment agreement doesn’t supersede federal laws about violence and theft. Nor, as it turns out, does it grant me immunity from prosecution for insider trading.

The legal team isn’t dick waving here. They’re trying to keep him out of jail and them from being subpoenaed, or worse.

The legal team is protecting the company, its best to have your own attorney that looks out for you, like I said with the "don't ask the internet for legal advice", advice.

I was softballing what I said, maybe a little tongue-in-cheek. You're not wrong, but this is a case where the definition of corporate selfishness does bleed a little bit into taking care of their employees due to enlightened self-interest.

What little I know about the SEC is that, like the IRS, you don't want them to pay any special attention to you, and having employees up on insider trading charges, even if they are dismissed, tends to get you special attention.

The fines for being found doing something bad are pretty high, but the immediate and long-term costs of being found 'dubious' are very high as well. Your company may have to re-file years of paperwork, and then be fastidious for the next ten years. Once you are on their radar you can't skate by doing spirit-of-the-law levels of hygiene on a bunch of tasks. You are having to do letter-of-the-law work on top of it (rules lawyers only lawyer rules that benefit themselves).

I don't know what it takes to trigger an audit by the SEC but I'm pretty sure someone going to jail is one of the boxes on that checklist.

Like many of the other comments here you don't have to quit to sell. But you likely need to pre-announce. Usually the broker where your options are held knows how to set these up. You can mostly choose any sell strategy you want. I once set up a once a month sale across a year ahead of time to spread the risk out.

You do probably want to consult a lawyer who is working for you rather than the company to advise on this.

This is easy - you need to work with your legal team to come up with a pre-planned stock trading plan. The thing is, you cannot buy/sell your stock on a whim (as you are privy to material information most shareholders are not). But you can do so in a pre-planned manner, eg. Sell X qty every quarter. You should be able to exercise the options regardless - this only affects the timing of when you are able to sell the exercised stock.

Note: I’m not a lawyer, just someone know knows a thing or two about this.

You shouldn't be "forbidden". There's a process for insiders to be able to trade their securities. It usually requires a 30+ day notice to the SEC/public. Your broker should know the basics. You may want to contact an attorney.

It's a little odd your legal department is telling you it's forbidden. Maybe there's something in the policies/contract at the company that forbids it. If not, they could be telling you what the company wants you to believe so that you don't sell (violation of the Bar's professional code).

Does your contract include a clause that states you'll lose these options if you're fired?