Author Topic: Those at big tech companies with ESPP- do you regret selling any of your stock?  (Read 1837 times)

wealthviahealth

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The tech company I have been at for the last 5 years has a great ESPP program ( steep discount on lowest price) and the stock has performed well since I have been there. Once a year I free up a few shares to the tune of $5-10k a year but have kept majority of it. Now that I am moving to a lower COL state and home ownership is a possibility for the first time, i have been thinking about selling a much larger chunk to help fund the downpayment of a house in the next 6-12 months. I normally have a "dont touch it" policy inspired by those millionaire microsoft secretaries but right now the stock is somewhat near all time highs and I other wise am not very liquid when it comes to cash on hand for a downpayment and who knows what the stock/markets overall might do in that time frame with all things covid happening.
Im curious to hear form those with great ESPP programs if they ever regretted selling their shares as well as what their overall strategy has been to selling/not selling.

ixtap

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DH once had good reason to regret not selling.

Now we follow the sell immediately to buy index funds approach.

shuffler

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I sell immediately.

  * The shares aren't magic.  There's no special quality that makes them different from other shares you might buy in the company, or in any other tech company.
  * If you happen to think that the very best place for your money is coincidentally invested in the very same company for which you work, then fine.  If you think that, you should probably be buying even more shares of the company in your 401k and regular after-tax accounts.  But doesn't it seem unlikely that the one place you happen to be working is also the best place for your investments, and not any of the thousands of other companies in the market?
  * You're already waaaaay invested in your company.  Let's count the ways.  You have un-vested stock options that will rise/fall with the success of the company.  Your normal compensation (salary, bonus, scale of future stock awards) are likely to rise/fall with the success of the company.  If you're a home-owner in a company-town (like me), then the value of your home is likely to be impacted by the success of the company.  If your company should fall on hard times (an accounting scandal?  CEO misconduct?), then these ESPP shares might drop in value at the same time you lose your job and your home's resale value tanks.  Yikes!  Do you want to weight your portfolio to rely on this company even more?
  * Some people think there's a tax advantage to holding the shares for a while.  Not really; not practically.  You're still going have the discount taxed as ordinary income.  (There's some fussy math about what happens if the shares have actually lost value by the time you sell them, but you seem pretty confident that that won't be the case.)

So I sell immediately, and then treat the money according to my investment policy, which says to mostly buy an index and a bit of bonds.

Oh, and to speak to the "regret" part.  No, not a bit.  Do you regret not buying Amazon stock 15 years ago?  Maybe you do in a "wouldn't it have been nice" sense, but not a "my life's one regret" sense.  Then you should feel the same way about your own company.  You had free fungible dollars.  You could have just as easily purchased Amazon as you did your own company, or vice-versa.  Why would you regret one more than the other?  So no, I don't regret it.  At least not any more than I regret not buying the winning lotto ticket (and I don't buy lotto tickets).

Paul der Krake

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Ex-big tech employee here. Didn't have an ESPP, but received shares regularly.

Sold them all on vest except for the first batch, which I kept for sentimental/YOLO value. I'd be slightly wealthier had I held. No regrets.

secondcor521

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I worked for a Fortune 500 tech company for about a decade and they had an ESPP during most of that time, although they fiddled with it over the years.  Generally they had six month windows and you got 15% off the lower of the first day's or last day's price.  No holding requirement, so lots of people deferred their salaries for six months then sold the shares the very next day.

I think you could defer up to 10% of your salary, so I did that.  I figured tying up the money for a year to get that kind of return was a good deal.

I went for the tax savings, so what I did was continuously defer salary into the ESPP, buy and hold for a year, then sell at that point.  So I generally had two purchase lots seasoning at any given time.  Proceeds went into whatever the next goal was at the time.  Zero regrets.

I did prioritize the ESPP below the 401(k).  I also had options, and generally exercised those whenever the total exceeded a percentage of my assets (5% or 10%, I can't remember what I used now).

ETA:

With a very few limited exceptions, I've generally just decided to make the best decision with the best knowledge and careful thought that I had at the time, and then move forward and not look back.  I've never done "how much would I have if I'd just done X instead of Y" kind of calculations.  I don't see the point of regretting an alternate universe that I'm not living in.

I also think having a generally prescribed plan laid out works better than a seat-of-your-pants seems-like-a-good-idea-at-the-time approach.  At least it does for me.  Maybe that's something that differs by personality.
« Last Edit: June 23, 2020, 01:21:46 AM by secondcor521 »

Car Jack

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I have a great ESPP.  The company sets the price at 15% below the market price on one of the buy dates.  Then it locks in that price for 2 years.  If a buy comes at anything higher than that lock, it gets dropped to 15% below the market on that day.

What has happened with this is that for example, Market is $50, so price is $42.50.  A year and a half later, a buy comes and market is $100.  So with an immediate sell, I make $57.50, more than doubling my money.  So a great plan.  Worst I can do is make 15% every time.

Another big tech I worked for, I joined and thought I was beyond the cut off date to get into the ESPP.  I put in all the paper work so I'd be in it for the next period.  Well, I was in it....didn't know it.....didn't look at my pay stubs ever.  Some time later, I quit, not knowing I even had shares.  Few weeks later, I receive notice in the mail of how many shares I owned.  Oh crap.  My discounted price?  $48.  Market price?  $12.  I sold and took my loss.  Although it wasn't my intent, I held.  Never will do that ever again, ever.

Plenty of great companies have done similar things.  If you think YOUR company can't, then get someone to hand dig your head out of the sand.

Semag

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I'm with those that sell immediately when able and max it out. The risk is relatively low and the 15% discount is an attractive gain, not to mention if the stock goes up during the offering period.

Our company has a second "non qualified" espp that I also am maxing out to the tune of 25% of my income (so 40% of my income is in espp). Our non qual plan is a "buy one get one" - no discount, but you get issues an equal number of shares at strike date for $0. Only issue is the holding period is 1 year, but it is protected to a 50% downturn. Roughly. Again, completely plan on selling everything the minute it is able to be sold.

sherr

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I sell immediately. Yes I would have historically made more money if I didn't. No I don't regret it at all.

Owning your own company's shares, either in an ESPP or in general, is the exact opposite of diversification. If your company has a bad quarter / year, you may find that your company shares have lost a lot of value at precisely the same time as you find yourself out of a job. Which may also align with a tough time for the industry, making it harder for you to find another job.

Just because that hasn't happened to you or I yet doesn't mean it's a good idea to hold a large amount of company shares. If you go looking you can find plenty of examples of people who it did happen to.

Sell immediately, diversify.

hodedofome

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Tell me the name of the company and Iíll tell you if you should hold or sell. Some are worth selling, some are worth holding.

sherr

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Tell me the name of the company and Iíll tell you if you should hold or sell. Some are worth selling, some are worth holding.

This however underscores the broader point, which is that unless you were going to hold that individual stock anyway, then no you should definitely not hold it just because it's your company and an ESPP.

Goldy

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Big stable company but not tech.  We have a lot of company stock, like 170k worth and buy 10k per year that is matched 1:1.  I sold some last year as we were getting close to 200k and really didnít like the tax hit on my return.  The stock also produces a massive 8-10% dividend which doesnít help the tax return.

My new plan is to hold it until we fire in a few years so we can start liquidating it and stay under the capital gains limit.


jinga nation

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Tell me the name of the company and Iíll tell you if you should hold or sell. Some are worth selling, some are worth holding.

SAIC
LDOS

hold or sell?

appleshampooid

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I worked at Amazon from 2006-2010 and received a lot of equity in the from RSUs (not ESPPs like the OP, but once you have the shares the source isn't as relevant).

Despite not being in tune with MMM or FIRE back then, I still followed the standard advice that has been echoed in this thread, which is to sell it all immediately. Concentration risk in your employer is never a good thing, etc...

So I sold...checks notes...over a thousand shares of AMZN in that timeframe for between $40 and $180. Not to mention the shares I gave up when I quit. In round numbers I would be about three million richer now if I had held on (minus taxes).

Now, this is a total hindsight is 20/20 thing. And who says I would have held on until today, this moment, at over $3000 a share? I probably would have bailed out around $1000 given that the stock was around $36 when I started. So the "three million dollars" thing is a pretty lame argument, but it still smarts a little bit.

Would I do anything different? Well I actually have the same situation now, just with my new employer. I get RSUs now, and I irrationally hold some of the stock for FOMO purposes. I have a 10b5-1 plan set up with Fidelity so that after each vesting event, after taxes are taken out, 75% of the remaining net shares are sold immediately. The other 25% I hold on to, and sell some at my discretion.

That question of "when to sell?" goes back to my initial story. If I had held on to any AMZN, when would I have sold it? Given that generally I am a buy-and-hold indexer, I don't have a lot of experience with these kinds of questions. Very recently our stock has skyrocketed as we have been pulling in record revenues during the pandemic. Up 4x since I started in 2017. So I have sold some of that 25% that I hold back. Honestly rationally, as everyone has said, I should sell all of it (especially at this all time high). But, well, FOMO. The shares I hold right now are about 3% of our net worth. So not a huge number, but enough that if it went up 10x from here I would be very happy to net that profit. I think I will probably try to maintain that 3% as a ceiling on my company holdings. Hopefully we keep going up up UP, and in retirement I am selling some along with our index funds at huge gains to fund our living expenses (but taxed at 0% because our total income is low enough).

So far I am happy with this plan. About 3 years in to my tenure here.
« Last Edit: August 11, 2020, 07:41:39 AM by appleshampooid »

Paul der Krake

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Man I would love to see what life was like at Amazon in the late 00s. But yeah you'd likely have sold somewhere on the way up. Many, many did.

Considering selling my small AMZN position now. But I'll probably hold on to it for sentimental reasons.

MaybeBabyMustache

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I sell immediately. Yes I would have historically made more money if I didn't. No I don't regret it at all.

Owning your own company's shares, either in an ESPP or in general, is the exact opposite of diversification. If your company has a bad quarter / year, you may find that your company shares have lost a lot of value at precisely the same time as you find yourself out of a job. Which may also align with a tough time for the industry, making it harder for you to find another job.

Just because that hasn't happened to you or I yet doesn't mean it's a good idea to hold a large amount of company shares. If you go looking you can find plenty of examples of people who it did happen to.

Sell immediately, diversify.

This is my philosophy. Husband & I work at the same tech  company. I sell automatically monthly. He holds, which drives me crazy, as it increases our dependence on a single company, and is not diversified. We've gotten lucky, but who knows what the future holds.

Paul der Krake

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I sell immediately. Yes I would have historically made more money if I didn't. No I don't regret it at all.

Owning your own company's shares, either in an ESPP or in general, is the exact opposite of diversification. If your company has a bad quarter / year, you may find that your company shares have lost a lot of value at precisely the same time as you find yourself out of a job. Which may also align with a tough time for the industry, making it harder for you to find another job.

Just because that hasn't happened to you or I yet doesn't mean it's a good idea to hold a large amount of company shares. If you go looking you can find plenty of examples of people who it did happen to.

Sell immediately, diversify.

This is my philosophy. Husband & I work at the same tech  company. I sell automatically monthly. He holds, which drives me crazy, as it increases our dependence on a single company, and is not diversified. We've gotten lucky, but who knows what the future holds.
Maybe load-balance your husbands?

appleshampooid

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Man I would love to see what life was like at Amazon in the late 00s. But yeah you'd likely have sold somewhere on the way up. Many, many did.
Eh, not that exciting. The real exciting times at Amazon were the decade before that (founding to profitability). I missed that part, too.

hodedofome

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I sell immediately. Yes I would have historically made more money if I didn't. No I don't regret it at all.

Owning your own company's shares, either in an ESPP or in general, is the exact opposite of diversification. If your company has a bad quarter / year, you may find that your company shares have lost a lot of value at precisely the same time as you find yourself out of a job. Which may also align with a tough time for the industry, making it harder for you to find another job.

Just because that hasn't happened to you or I yet doesn't mean it's a good idea to hold a large amount of company shares. If you go looking you can find plenty of examples of people who it did happen to.

Sell immediately, diversify.

This is my philosophy. Husband & I work at the same tech  company. I sell automatically monthly. He holds, which drives me crazy, as it increases our dependence on a single company, and is not diversified. We've gotten lucky, but who knows what the future holds.

What's the tech company? Your husband may be right.

sherr

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I worked at Amazon from 2006-2010 and received a lot of equity in the from RSUs (not ESPPs like the OP, but once you have the shares the source isn't as relevant).

Despite not being in tune with MMM or FIRE back then, I still followed the standard advice that has been echoed in this thread, which is to sell it all immediately. Concentration risk in your employer is never a good thing, etc...

So I sold...checks notes...over a thousand shares of AMZN in that timeframe for between $40 and $180. Not to mention the shares I gave up when I quit. In round numbers I would be about three million richer now if I had held on (minus taxes).

This is just naked survivorship bias, is it not? Just because it would have happened to work out for you in particular doesn't mean it's a good idea in general. Or even for you going forward.

Every other person in the world also "lost" those $3MM by not investing in Amazon over the same time period. The only thing that's different about you is that since you worked there your risk from investing in AMZN would have been higher than the average person's.

There's nothing magic about ESPP shares, if the shares are valuable to own in general then they're valuable to own in an ESPP. The point is that the future of any particular company is hard to predict and most people are bad at it, and the best the average person can do on average is to sell ESPP shares and diversify.
« Last Edit: August 12, 2020, 08:03:22 AM by sherr »

hodedofome

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Tell me the name of the company and Iíll tell you if you should hold or sell. Some are worth selling, some are worth holding.

SAIC
LDOS

hold or sell?

Sorry, didn't realize anyone responded to this until today. Personally I'd sell half or all and if you still want tech exposure, put it in the Vanguard tech funds like VGT.

If you were in a software as a service company that is a market leader (or one of the FAANGM or a leading semiconductor company) I'd probably tell you to hold onto your shares.

appleshampooid

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I worked at Amazon from 2006-2010 and received a lot of equity in the from RSUs (not ESPPs like the OP, but once you have the shares the source isn't as relevant).

Despite not being in tune with MMM or FIRE back then, I still followed the standard advice that has been echoed in this thread, which is to sell it all immediately. Concentration risk in your employer is never a good thing, etc...

So I sold...checks notes...over a thousand shares of AMZN in that timeframe for between $40 and $180. Not to mention the shares I gave up when I quit. In round numbers I would be about three million richer now if I had held on (minus taxes).
This is just naked survivorship bias, is it not? Just because it would have happened to work out for you in particular doesn't mean it's a good idea in general. Or even for you going forward.

Every other person in the world also "lost" those $3MM by not investing in Amazon over the same time period. The only thing that's different about you is that since you worked there your risk from investing in AMZN would have been higher than the average person's.

There's nothing magic about ESPP shares, if the shares are valuable to own in general then they're valuable to own in an ESPP. The point is that the future of any particular company is hard to predict and most people are bad at it, and the best the average person can do on average is to sell ESPP shares and diversify.

Yes, you're absolutely right. It's not rational but it still sucks. So to satisfy that part of my irrational brain I just hold on to a bit of my current company stock. I'm not saying it's the right decision based on logic, just what I have arrived at as a compromise between logic and my stupid monkey brain.

park10

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I sell immediately. Yes I would have historically made more money if I didn't. No I don't regret it at all.

Owning your own company's shares, either in an ESPP or in general, is the exact opposite of diversification. If your company has a bad quarter / year, you may find that your company shares have lost a lot of value at precisely the same time as you find yourself out of a job. Which may also align with a tough time for the industry, making it harder for you to find another job.

Just because that hasn't happened to you or I yet doesn't mean it's a good idea to hold a large amount of company shares. If you go looking you can find plenty of examples of people who it did happen to.

Sell immediately, diversify.

This is my philosophy. Husband & I work at the same tech  company. I sell automatically monthly. He holds, which drives me crazy, as it increases our dependence on a single company, and is not diversified. We've gotten lucky, but who knows what the future holds.
-Is it a public company ? Very easy to hedge, say your husband has 1000 shares. you can put long term puts at current price, and keep on selling weekly or monthly otm puts.. this is an easy problem to solve really...there are several cheaper ways to hedge, but this is simplest.

Paul der Krake

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I sell immediately. Yes I would have historically made more money if I didn't. No I don't regret it at all.

Owning your own company's shares, either in an ESPP or in general, is the exact opposite of diversification. If your company has a bad quarter / year, you may find that your company shares have lost a lot of value at precisely the same time as you find yourself out of a job. Which may also align with a tough time for the industry, making it harder for you to find another job.

Just because that hasn't happened to you or I yet doesn't mean it's a good idea to hold a large amount of company shares. If you go looking you can find plenty of examples of people who it did happen to.

Sell immediately, diversify.

This is my philosophy. Husband & I work at the same tech  company. I sell automatically monthly. He holds, which drives me crazy, as it increases our dependence on a single company, and is not diversified. We've gotten lucky, but who knows what the future holds.
-Is it a public company ? Very easy to hedge, say your husband has 1000 shares. you can put long term puts at current price, and keep on selling weekly or monthly otm puts.. this is an easy problem to solve really...there are several cheaper ways to hedge, but this is simplest.
Buying derivatives on company stock is often against the trading policy, you will almost certainly need to get clearance from legal beforehand, and legal is really good at saying no to anything that creates work for them.

park10

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I sell immediately. Yes I would have historically made more money if I didn't. No I don't regret it at all.

Owning your own company's shares, either in an ESPP or in general, is the exact opposite of diversification. If your company has a bad quarter / year, you may find that your company shares have lost a lot of value at precisely the same time as you find yourself out of a job. Which may also align with a tough time for the industry, making it harder for you to find another job.

Just because that hasn't happened to you or I yet doesn't mean it's a good idea to hold a large amount of company shares. If you go looking you can find plenty of examples of people who it did happen to.

Sell immediately, diversify.

This is my philosophy. Husband & I work at the same tech  company. I sell automatically monthly. He holds, which drives me crazy, as it increases our dependence on a single company, and is not diversified. We've gotten lucky, but who knows what the future holds.
-Is it a public company ? Very easy to hedge, say your husband has 1000 shares. you can put long term puts at current price, and keep on selling weekly or monthly otm puts.. this is an easy problem to solve really...there are several cheaper ways to hedge, but this is simplest.
Buying derivatives on company stock is often against the trading policy, you will almost certainly need to get clearance from legal beforehand, and legal is really good at saying no to anything that creates work for them.
What ? calls and puts are bought and sold everyday (sometimes by employees who trade part time or invest for long term using options). Never heard of any such policy, also impossible to enforce. Only thing that remotely come close to your post is if the OP owns more than 1 % stake in the company or has some conflict / insider info etc (very specific laws but not applicable unless you are a major shareholder). Let us not misguide.

seattlecyclone

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Buying derivatives on company stock is often against the trading policy, you will almost certainly need to get clearance from legal beforehand, and legal is really good at saying no to anything that creates work for them.
What ? calls and puts are bought and sold everyday (sometimes by employees who trade part time or invest for long term using options). Never heard of any such policy, also impossible to enforce. Only thing that remotely come close to your post is if the OP owns more than 1 % stake in the company or has some conflict / insider info etc (very specific laws but not applicable unless you are a major shareholder). Let us not misguide.

My last two corporate employers, probably three given @Paul der Krake's comment, had this exact policy in place. No short selling of company stock or trading in derivatives of any kind. Also transactions were limited to a certain portion of the quarter where we were assumed to be less likely to possess material nonpublic information about unreleased financial results. Did I ever hear of this policy being enforced, especially against lower-level employees? No. It was on the books all the same.

My experience holding a six-figure quantity of my mid-cap employer's stock is that the volatility can be an emotional rollercoaster. As much as I tried to avoid it, I regularly made irrational decisions based on recent swings in the price of the stock. To the extent that selling all your shares doesn't completely blow up your tax situation for the year, I recommend doing it.
« Last Edit: August 15, 2020, 10:29:52 AM by seattlecyclone »

Paul der Krake

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What ? calls and puts are bought and sold everyday (sometimes by employees who trade part time or invest for long term using options). Never heard of any such policy, also impossible to enforce. Only thing that remotely come close to your post is if the OP owns more than 1 % stake in the company or has some conflict / insider info etc (very specific laws but not applicable unless you are a major shareholder). Let us not misguide.
This is definitely a thing at FAANG companies (or whatever the acronym is these days). Can you get away with it? Maybe. If someone finds out, getting fired will be the least of your problems.


park10

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What ? calls and puts are bought and sold everyday (sometimes by employees who trade part time or invest for long term using options). Never heard of any such policy, also impossible to enforce. Only thing that remotely come close to your post is if the OP owns more than 1 % stake in the company or has some conflict / insider info etc (very specific laws but not applicable unless you are a major shareholder). Let us not misguide.
This is definitely a thing at FAANG companies (or whatever the acronym is these days). Can you get away with it? Maybe. If someone finds out, getting fired will be the least of your problems.
This is nonsense...... There is NO LAW prohibiting general employees from shorting company stock..(A law exists against shorting for designated officers, if you own > 1 % company, sit on Executive committee, etc etc)....but I am only talking about Buying a Call and Buying a Put, paying premium to hedge (Not shorting common).....again stop misleading....Show me an actual Law that stops anyone (even those designated Insiders) from using options... Also, they will need a judge to order broker to disclose the holdings in your personal account... goodness. At my company (Megacorp not fanmg whatever) option investing/trading is allowed and encouraged within 401-K brokerage link.

seattlecyclone

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It's a company policy, not a law. They want your financial interests not to be in conflict with those of the company. If you're shorting the stock or buying options where you profit from a decline in the stock price, that's a conflict of interest.

Paul der Krake

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Right. Insider trading laws are veeeeeery broad, prosecutors have a lot of discretion on what is and what is not insider trading, and are very bad PR for everyone involved.

There are tens of thousands of software devs, who are several rungs removed from any real leadership position, who are routinely exposed, or can trivially find out, stock-moving information that would make headlines on CNBC. It's much easier for the company to say "no options, and sell stock only during these designated times" rather than try and guess what's in the employee's mind. I don't know where you work, maybe your megacorp takes these concerns less seriously than Big Techô.

If you knowingly violate company policy, you will have an uphill battle proving your good faith if the trade ends up looking suspicious, regardless of what the original intent was. And you absolutely will be fired regardless of how the trade went, foregoing your future stock comp.

ctuser1

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You guys should someday work as a private side employee at a bank.

1. All brokerage accounts by you, spouse has to be "approved".
    -> No Schwab checking for me as it counts as a brokerage.
2. EBay selling? That is outside business activity. You better make sure that is "pre-approved". Yes, I have such a pre-approval on my HR file.
3. You want to buy/sell? You better get pre-clearance (except if you are buying selling one of the handful of pre-cleared indexes, with at least 30 days between any buy/sell). Pre-clearence = approval by manager + an internal group. You can only raise it once your manager starts work, and the pre-clearance is valid only for the calendar day.
4. Derivatives?? Well - by the time you do all the back and forth explaining what you are doing in order to get pre-clearance, the day would be over and you need to start over against next day.

You break any of the above? Well - you will be fired! Generally you don't face criminal charges, but that can happen too depending on the circumstances.

I have an erstwhile colleague currently working at SEC. He was telling me even scarier stories - not sure if embellished or not.

hodedofome

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  • Location: Texas
You guys should someday work as a private side employee at a bank.

1. All brokerage accounts by you, spouse has to be "approved".
    -> No Schwab checking for me as it counts as a brokerage.
2. EBay selling? That is outside business activity. You better make sure that is "pre-approved". Yes, I have such a pre-approval on my HR file.
3. You want to buy/sell? You better get pre-clearance (except if you are buying selling one of the handful of pre-cleared indexes, with at least 30 days between any buy/sell). Pre-clearence = approval by manager + an internal group. You can only raise it once your manager starts work, and the pre-clearance is valid only for the calendar day.
4. Derivatives?? Well - by the time you do all the back and forth explaining what you are doing in order to get pre-clearance, the day would be over and you need to start over against next day.

You break any of the above? Well - you will be fired! Generally you don't face criminal charges, but that can happen too depending on the circumstances.

I have an erstwhile colleague currently working at SEC. He was telling me even scarier stories - not sure if embellished or not.

Totally get it. Most of our clients are banks and every day I'm shocked at the regulations they have. Some colleagues work for insurance companies and just stay away from investing in any part of the space they know so well because of regulations.

phildonnia

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I worked for a tech company in 2000, when I and the world were more naive. 

At our monthly company meetings, we were not just told that we would become rich after the IPO; but it was strongly suggested that if we didn't participate in the ESPP, then we must not really believe in the company.

One guy I worked with, dollar signs in his eyes, borrowed from his 401(k) to buy in.

I put in about $5000, at a 10% discount.  Sure enough, after the IPO, I was rich during the "locked out" period.  by the time I was able to sell, I had lost about $1000.  I sold it right away, despite assurances that this was a temporary market fluctuation or something.

We all got laid off within a year.  I don't know what happened to that other guy.