Sophisticated counsel for high-performing leaders

Equity compensation is traditionally the largest creator of wealth for a public company executive. Ultimately, we find the long-term wealth of an executive comes from their ongoing receipt of various stock awards, including options, restricted stock grants, restricted stock units and/or performance shares.

Each award structure has its own set of characteristics and tax outcomes, but it is paramount that advisors serving this market have tools to help frame effective decisions around equity compensation to ensure the client is maximizing the value of each award. Using our proprietary analysis tool, TRITON℠, we can provide effective analysis to aid in determining the best course of action over the life of each award.

This analysis is customized for each client and includes stock option exercise timing and methodologies (including stock swaps), 83(b) elections and net unrealized appreciation, among other topics. The review incorporates the impact of decisions on taxes, cash flow, concentration risk and regulatory reporting requirements so that each executive is well-equipped to map out the best plan for their unique circumstances.

While the ongoing receipt of equity-based compensation can create a significant amount of wealth for an executive, it also typically leads to a concentration in employer stock. This concentration often poses the single largest risk exposure on an executive’s balance sheet.

We understand the assessment of this risk is much more nuanced than simply identifying a target percentage or a threshold dollar amount that is too much to have in one stock. Additional factors, including mandated ownership levels, insider trading regulations and pressure from shareholders and board members must be incorporated into the assessment of risk and development of a plan to further help reduce the risk over time.

Our strategy involves taking steps to grow the non-employer stock portion of an executive’s balance sheet to a level where issues surrounding concentration risk can be mitigated and lifestyle preferences are fully supported.

In our experience, the regulations surrounding trades in employer stock present a complex challenge affecting many public company executives. Prior to executing trades for executives, it is critical that Rule 144, Section 16, Rule 10b5-1  and company trading policies must all be considered.

SOCATA Capital of Raymond James offers fluency in all of these rules. We also possess an abundance of experience interacting with corporate counsel and transfer agents to facilitate smooth trade settlement – and have designed and executed many Rule 10b5-1 plans over the years.

As a testament to our expertise in this area, the Raymond James Global Equities and Investment Banking division leverages our team to provide Rule 10b5-1 plan support to many public company clients of the firm. This support can be provided as a platform service to all employees at a company or on an ad-hoc basis to individual executives and board members who have a specific need. Additionally, our team has developed a solution for incorporating Up-C/UPREIT conversions into a Rule 10b5-1 sales plan for companies with that unique corporate structure.

Built by our team, we leverage our proprietary tool, TRITON℠, to help provide objective, proactive advice on two topics that are central to the life of a public company executive: equity compensation and employer stock concentrations.

The customized reporting is designed to aid in decision making and includes analysis for:

• Stock option exercise timing and methodology
• Stock swap exercise illustration
• 83(b) elections
• Net unrealized appreciation review