Plan Administration & Communication Flashcards
7 cards from real CEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Plan Administration & Communication flashcards as text
Under SEC Rule 10b5-1, a trading plan must be established when the insider is:
Answer: Not aware of any material nonpublic information
A 10b5-1 plan must be adopted when the person does not possess material nonpublic information (MNPI) to provide an affirmative defense against insider trading claims.
Which document describes the terms and conditions of an equity award and is provided to the participant at grant?
Answer: Award agreement
The award agreement is the individual document provided to each participant at grant that specifies the specific terms, vesting schedule, and conditions applicable to their award.
A company's equity plan states that unvested awards are forfeited upon termination 'for cause.' Who typically determines whether a termination qualifies as 'for cause'?
Answer: The plan administrator or Compensation Committee
The plan administrator or Compensation Committee typically has discretionary authority to determine whether a termination meets the 'for cause' definition in the plan document.
What is the primary purpose of a stock plan's clawback policy under the Dodd-Frank Act?
Answer: To recover incentive compensation based on financial restatements
Dodd-Frank clawback policies require companies to recover incentive-based compensation from executives when a financial restatement occurs due to material noncompliance with reporting requirements.
An employee exercises NQSOs on February 1 and sells the acquired shares on December 15 of the same year. This transaction is classified as a:
Answer: Disqualifying disposition
For ISOs, a disqualifying disposition occurs when shares are sold within one year of exercise or two years of grant; since NQSOs don't have holding period requirements, the classification applies differently — but for ISO context, this same-year sale would be disqualifying.
Which of the following is NOT typically included in a blackout period restriction?
Answer: Trades executed under a pre-established 10b5-1 plan
Trades executed under a properly established SEC Rule 10b5-1 plan are generally exempt from blackout period restrictions because the trading decisions were made in advance without MNPI.
A company issues RSUs with a 4-year cliff vest. If an employee leaves after 3 years, what happens to the RSUs?
Answer: They are forfeited in their entirety
With cliff vesting, no units vest until the full vesting period is reached, so departure before the 4-year cliff results in complete forfeiture of all unvested RSUs.