SEC Rules on Stock Options • A blackout period in financial markets is when certain company employees are prohibited from buying or selling company shares.
• Most companies voluntarily impose a blackout period on employees who might have insider information ahead of earnings releases.
• The Sarbanes-Oxley Act of 2002 also imposes a blackout period on some pension plans when significant changes to the plan are made.
• Typically, a company will define its blackout period, stipulating the time frame and who is and isn't allowed to trade shares.
• The Securities and Exchange Commission (SEC) doesn't prohibit executives from stock transactions ahead of earnings as long as the transactions are registered properly.
FAQ
• Can you exercise Stock options:
A: You can exercise stock options during a blackout period. However, if you are an Insider, you must pay the exercise price in cash (you cannot do a “cashless” or “net” exercise). Additionally, Insiders may not sell the shares received upon exercise of their options until the end of the blackout period.