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The shares are no longer restricted and are fully vested, and there are no upcoming announcements or other inside information that may affect the share price.

It just smells like a conflict of interest if it's true. What would prevent a company board from blocking the employees while the board itself sells and drives the share price down?

  • What do you mean by 'blocking'? He can call his broker and sell them, done. – Aganju Jul 12 '18 at 3:31
  • Well I mean if he did that and the board did not allow it, he could get in trouble with a the law, or a contract. Is that possible? – aljo f Jul 12 '18 at 3:51
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    Aside from 'Insider Trading', there is no law that disallows him to sell his assets. And his contract says whatever his contract says, you need to read it to know if it says he needs to ask permission. But that would contradict the 'fully vested'. Of course, the could terminate him when (if) they find out, but then they can terminate him anyway anytime. – Aganju Jul 12 '18 at 3:54
  • Is this within an ESOP? – user662852 Jul 12 '18 at 4:28
  • I'm not sure, but please tell me more, so I'll know which direction to point my research to. – aljo f Jul 12 '18 at 4:31
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What would prevent a company board from blocking the employees while the board itself sells and drives the share price down?

Most countries have regulations as to when "Related Parties" having "Insider Info" can buy and sell shares.

No one can block the employee from selling the vested shares anytime. All transactions are monitored and scrutinized so that they are not in violation of insider trading laws.

The Organization can, in order to comply with regulations and aid fair play, declare a period when buying and selling are restricted. This is applicable to all and can't be selective to few.

  • Thanks for your input, I thought so as well. But what if the company made it so that the policy now becomes "the employee has to get written approval from the board before selling". Would that be legal? – aljo f Jul 12 '18 at 3:54
  • @aljof It will depend on the jurisdiction, but I suspect in many places, the company wouldn't be able to add such a clause to employment contracts without the agreement of the employee (in some places, it will be easier than others to say "accept the new terms or be fired", but in many places this would be against employment law). – TripeHound Jul 12 '18 at 7:56
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In the US in the past (pre-Enron) some companies blocked the ability to sell company shares by requiring 401K matching funds to be company stock. The employee had no ability to sell those shares unless they quit, retired, or were fired. Thats is no longer true today.

If the company is not publicly traded, even if the shares are vested, the only way to sell the shares is either back to the company, or maybe to other existing shareholders. In a private company it could be possible for the company to require, by contract, that officers of the company own a percentage of the company or invest a set amount in the company. When people say they are a partner they are expected to share some of the risk, and benefit from the gains. Think in terms of law firms and doctors practices.

But if the company is public, and the shares have vested, the employee can sell them at any time. They can do this in the open market. Of course if they are in the 401K or ESOP there are other rules, but they are clearly defined by those programs.

If the employee is in a position of having insider knowledge, then the buying or selling of shares has to be done while considering the insider trading laws.

In the case of a public company there can also be contractual obligations. It would likely include officers of the company. The board would want the CEO, COO, CFA , vice presidents and board members to be invested in the company. Those requirements would be clearly laid out in the contract.

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