For your situation
Who is on my side when I sell company stock?
The shares landed in an account you did not choose. The plan administrator your company uses is a large brokerage owned by a bank, so every vest, every exercise and every purchase-plan lot has settled there for years, and at some point its wealth division called. The suggestions were fluent: an exchange fund, a collar, a line of credit against the position so nothing has to be sold. Each was presented as a solution to concentration, and each keeps the shares, the proceeds or both inside the same building. This page is about how to read that conversation, what an insider can actually do, and what a fiduciary asks before agreeing to any of it.
Why the shares are where they are
Most public companies hire a brokerage to run the stock plan: it records the grants, handles the vesting, withholds the tax shares and holds what is left. The shares therefore sit at the administrator by default, in an account opened for you rather than by you. Nothing about that is improper. It does mean the firm holding your concentrated position is often also a firm that would like to advise on it, and the two roles are paid differently.
Follow the money through a typical large brokerage. When shares are sold, the in-house desk executes the trade. When the proceeds are reinvested, the wealth division typically earns on what they go into, and the shelf often includes the parent’s own funds and models. The structured solutions for concentration, an exchange fund, a collar, a prepaid variable forward, are built or distributed by the same institution and carry their own economics inside the pricing. A securities-based line against the position keeps the shares, and the collateral, at the bank while the concentration is untouched. None of these is a scheme. Each is a product a large firm is built to offer, and the advisor recommending it is often paid, through a grid the firm sets, in a way that depends on which one you choose.
What an insider can actually do
Set the shelf aside for a moment. An insider has a short list of real tools, and the most important one is a calendar. The figure shows a year for a senior officer at a company with quarterly blackouts: the shaded bands are the closed periods around each quarter-end and earnings release, the gaps are open windows, and the small marks are scheduled sales. Notice where the marks land.
A Rule 10b5-1 plan is a written schedule of sales, adopted while you hold no material nonpublic information, that then runs without you. Since the 2022 amendments the plan must be adopted and operated in good faith, directors and officers certify as much in the plan itself, and a cooling-off period separates adoption from the first sale: for directors and officers, the later of 90 days or two business days after the company files its quarterly report, capped at 120 days. Changing the amount, price or timing terms counts as adopting a new plan and restarts the clock. That is the tool that lets sales land inside a blackout. The others are plainer: open-window sales, with a diversification schedule written down so each window is a step rather than a fresh debate; hedging where the company’s insider trading policy permits it, and many do not; and, for affiliates, Rule 144, with its volume limits, manner-of-sale conditions and notice filing for larger sales. Our piece on 10b5-1 plans covers the mechanics in detail.
What a fiduciary asks first
Before any product is discussed, an adviser who owes you a duty of loyalty wants the shape of the household. How much is too much, in your own terms: not a rule of thumb, but what a bad year at the company would do to a family whose salary, bonus, unvested grants and vested shares all depend on it. Our piece on how concentrated is too concentrated works through that arithmetic. Then the record: every tax lot with its date and basis, because the order of sales changes the tax bill more than the timing does; the 83(b) history if you were a founder before you were an officer, since an election filed years ago sets the basis and holding period on those shares; the incentive stock options and their spread, because an exercise-and-hold can create alternative minimum tax on income you did not receive, the subject of our piece on ISO exercises and the AMT. And then the question a desk rarely asks: what does your spouse think the position is for? The household holds the risk together, and the person who was not in the room when the grants were negotiated is the one a fiduciary wants at the table.
The window problem, in concrete form
The pillar of this series describes high touch as the call that comes before the decision window, and the executive’s case is where that phrase stops being abstract. A 10b5-1 plan cannot be adopted while you know something the market does not, and it cannot start selling for months after it is signed. So the plan has to be written in an open window, before the quarter closes, before the deal you are not yet aware of. An adviser who calls after the news is not being unhelpful; the calendar has moved on, and the next chance is the next window. An adviser who calls in the open window, with the schedule already drafted from the household picture above, is doing the thing this series is about. That requires knowing your dates, which requires knowing you.
The plan has to exist before the news does.
Every insider tool shares that property. A plan, a hedge where permitted, a diversification schedule: each is adopted in the quiet and works in the noise. The conversation that produces it has to happen in the quiet too.
What the in-house desk does well
An honest account says so. The desk already holds the shares, so there is no transfer to arrange and no legend to re-paper. It knows the company’s plan rules because it administers them, it has seen many 10b5-1 plans through adoption, cooling-off and execution, and it has the compliance staff to keep an affiliate’s Rule 144 filings straight. If you want a plan executed competently, a large firm’s desk can do that, and often does. The question this page asks is not whether the desk is capable. It is whose economics the recommendation serves when the desk is also recommending what to do with the proceeds, and whether the person advising you is paid the same whichever answer you give.
How to read what you are being offered
Turn each card over for what a fiduciary would ask before agreeing. The verdicts are the usual case; a specific proposal can differ, and the point of the question is to find out.
What each kind of equity means for selling
The tools above apply differently depending on what you hold. The tabs give the selling consequence for each; our equity compensation series goes deeper on each one.
Taxed at vest, so holding is a choice
The value of a restricted stock unit is ordinary income on the day it vests, and the shares you keep afterward have a basis equal to that day’s price. Selling soon after vest therefore adds little or no tax, which makes sell-at-vest the clean baseline and every held share an active decision. For an insider, a 10b5-1 plan can be written to sell each tranche as it vests, so the blackout calendar stops deciding for you.
Two kinds, two tax problems
A nonqualified option produces ordinary income on the spread at exercise, and the resulting shares behave like RSU shares from there. An incentive stock option can produce long-term capital gain on the spread if the shares are held more than two years from grant and one from exercise, but the spread is alternative minimum tax income in the year of exercise whether or not you sell. Exercise timing, exercise size and whether to sell in the same year are modelled together, across years, before a share is exercised.
Small lots, their own clock
Purchase-plan shares are bought at a discount from payroll, and a qualified plan gives the discount favorable treatment only if the shares are held two years from the offering date and one from the purchase. Each purchase is its own lot with its own clock, so a concentrated employee often holds a dozen small lots at different stages. A diversification schedule lists them and sells the ones whose holding periods have run first.
Old basis, an 83(b) history, and affiliate status
Shares bought or granted before the company was public usually carry a very low basis and, if an 83(b) election was filed at grant, a holding period that started then. They may also be restricted or control shares, which means Rule 144 volume limits and manner-of-sale conditions apply, and a notice is filed with larger sales. Some may qualify for the exclusion on qualified small business stock, which is checked before anything is sold. These lots reward the slowest, most deliberate schedule.
Before the next window
What you can have in hand before the window opens, so the conversation in it is a decision rather than a discovery.
What moves if you change advisers
Less than the administrator’s wealth division may imply. Vested shares transfer in kind to a custodian such as Charles Schwab or Fidelity, in your name; restricted or control shares travel with their legend and your affiliate status, so the new custodian needs the Rule 144 paperwork on file before any later sale. Unvested grants stay at the administrator until they vest, and each vest can then be moved. A 10b5-1 plan in force is a contract with the broker executing it, so it generally has to be re-papered with the new broker and approved again under the company’s policy; whether that counts as a new plan, with a new cooling-off period, depends on whether the amounts, prices and dates change, which is a question for the company’s counsel before anything is signed. A lending line against the shares is repaid or refinanced before the pledged account can move. The general mechanics are in how switching works; the executive’s version adds the legend, the plan and the policy, and all three are sorted before a transfer request goes in.
The principle to carry
Every tool for a concentrated position works only if it is set up before the news, which means the adviser has to know your calendar and your household before the window opens. Ask of any recommendation, from any firm including this one, what the person making it is paid if you say yes, and what the same schedule would look like at a firm that earns nothing on the shares or the proceeds.
Aspirean is an independent, fee-only, fiduciary wealth management firm with offices in Marin County, St. Joseph and Chesterton. If your net worth and your paycheck share a ticker, we would rather draft the schedule with you in this window than read about the last one.
Frequently asked questions
Do I have to use my company stock-plan administrator to sell my shares?
Usually not. The administrator holds the shares by default because the company hired it to run the plan, but vested shares can generally be transferred in kind to a custodian of your choosing and sold from there. Unvested grants stay with the administrator until they vest. Your company insider trading policy may require pre-clearance or a particular broker for a 10b5-1 plan, so the policy is read before anything moves.
What is the cooling-off period for a Rule 10b5-1 plan?
Since the 2022 amendments, directors and officers cannot trade under a new plan until the later of 90 days after adoption or two business days after the company files the quarterly or annual report covering the quarter of adoption, up to a maximum of 120 days. Other insiders wait 30 days. Changing the amount, price or timing terms of an existing plan counts as adopting a new one and restarts the period.
Is an exchange fund or a collar a good way to handle a concentrated stock position?
Each can fit a particular household, and each carries costs and conditions that belong in writing before you agree. An exchange fund typically requires a multi-year hold before diversified securities can be withdrawn. A collar may be prohibited by your company insider trading policy, and it changes the tax treatment of the hedged shares. A fiduciary compares either against a plain schedule of sales before recommending one.
Is it a conflict for the bank holding my shares to manage the proceeds when I sell?
It is a structural conflict, and the firm is required to disclose it. The institution earns on the trade, on any house funds or models the proceeds go into, and on any lending against the position, and the advisor is often paid through a grid that depends on the choice. That does not make the advice wrong. It means the fee layers and the pay should be in writing, and compared against an alternative.
Can restricted or control shares transfer to a new custodian if I change advisers?
Yes. They transfer in kind, and the legend and your affiliate status travel with them, so the receiving custodian needs the Rule 144 documentation on file before any later sale. Cost basis follows the shares for covered lots and is reconciled by hand for older ones. A 10b5-1 plan already in force is re-papered with the new broker and approved again under the company policy, which is arranged before the transfer goes in.
This piece is general education, not individual advice.
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