Is ETP 10b5-1 right for your company?

All publicly traded companies will benefit from implementing a 10b5-1 compliant employee trading plan (ETP), which allows their employees to sell company stock on a predetermined schedule.

A 10b5-1 compliant ETP offers affirmative defense to your employees, which not only protects them from any insider trading concerns but also guards your company’s reputation against any insider trading scandals.

If some of your officers and directors are already enrolled in a paper-based 10b5-1 plan, you will benefit immediately by migrating these employees to an online ETP.

A paper-based 10b5-1 plan takes a few weeks to set up and is extremely tedious to administer. In contrast, an online ETP can be set up in a few minutes and requires minimal administration. As a bonus, online ETP comes with reports that provide constant visibility to the participants as well as the administrators.

The simplicity of ETP improves participation rates of the officers, directors, and other insiders in the 10b5-1 program making it easier for them to remain compliant with the insider trading policies of the company.

Migrating your senior management or corporate insiders from a paper-based 10b5-1 to an ETP 10b5-1 is a win in itself. However, to unlock the full potential of the ETP, it should be offered to all employees of the company who are given stock compensation and are also asked to abide by trading blackouts. (Read: Why do employees choose ETP 10b5-1?)

Since ETP is a much simpler online workflow, it is preapproved by the legal teams, and thus can be offered at scale to all employees without a significant rise in the administrative cost.

To understand whether or not you should offer ETP to all employees, ask yourself these four questions:

1. Does the company compensate a large number of its employees with publicly traded stock?
2. Does the stock compensation represent a significant portion of its employees’ income?
3. Does the company have quarterly blackout windows for all or most of the employees?
4. Do the company employees routinely deal with sensitive intellectual property, financial information, or any other forms of material non-public information (MNPI)?

If the answer to all the above questions is “yes” then ETP is a suitable program for your entire organization.

The employees who do not necessarily have access to MNPI could still benefit from a trading plan that gives them an opportunity to reduce personal financial risk through systemic diversification, or, just to raise enough cash on a schedule to meet their expenses without running afoul of insider trading policies. (Read: Why do employees choose ETP 10b5-1?)