How the Rule 10b5-1 changes may impact you

 

Operator:                   Hello. My name is Gretchen, and I will be your conference operator today. At this time, I would like to welcome you to our audio cast regarding recent adopted amendments to Rule 10b5-1, training plans and new disclosure requirement designed to enhance investor protection against insider trading hosted by Jeff Markham, managing director and vice chairman of Merrill Lynch Wealth Management.

 

                                    The views and opinions expressed are those of the presenters as of May 4^th, 2023, subject to change without notice and may differ from views expressed by Bank of America Corporation or its affiliates. This is presented for information purposes only and should not be used or construed as a recommendation of any services, security, or sector. Please note important information at the end of this call. I am now turning the call over your host, Jeff Markham.

  

Jeff Markham:          Thank you, Gretchen, and welcome everyone to this audio cast. We think it is going to be a timely call given the questions we’ve been receiving and the clarity that many of our clients and corporations we’ve worked with have been seeking.

 

                                    On February 27^th of this year, the Securities and Exchange Commission amended its Rule10b5-1, and they added new disclosures requirements for the use of 10b5-1 trading arrangements. Some of those changes included mandatory cooling off period and new certification requirement and certain limits on trade plans for individuals with access to material nonpublic information.

 

                                    We want to cover that today and hopefully provide some clarity. We’ve got three really experts in this. We’re going to be joined by Debbie McGrath, who’s a director in our Executive Advisory Services here at Bank of America and Merrill Lynch, and part of Retirement and Personal Wealth Solutions team, Sean O’Brien, our managing director and head of Wealth Equity Sales and Trading, and the Gayle Hobson. Gail is the HIPAA Compliance officer for Yum! Brands and deals with this on a daily basis in her role.

 

                                    I’m going to hand it over to the three of them, let them give you a quick bio on their background and then we’ll get in to some questions. Gayle, why don’t I turn it over to you?

 

Gayle Hobson:           Great. Thank you. In my role at Yum! I sort of have two roles. I’m the HIPAA compliance officer, which means I work obviously with healthcare and benefits, but I’m also the manager of security compliance for Yum! Brands name. In my security’s role, I manage our 10b5-1c program, Section 16 of Rule 144 compliance, escalated retail shareholder matters and proxy ownership reporting disclosures. I work closely with our company’s Executive Compensation Department providing plan interpretation and filing forms, jurisdiction registration and exemption application.

 

                                    With over 34 years, in addition to being a dinosaur, I have seen a lot of evolution of securities offerings and SEC rule changes. I’m kind of an odd duck. I’m one of those people, who really enjoys digging into regulations and the public speaking, and I have spoken to the local bar associations, American Bar Association, National Association of Tax Professionals, some employment law organizations and the most recently with the Merrill Lynch, at the Merrill Lynch client conference. I’m a big Merrill Lynch advocate and was pretty instrumental in picking this interview team as our captive broker based on their superb level of expertise in these areas. Debbie?

 

Debbie McGrath:      Thanks, Gayle. Yes. Thanks, everyone. My name is Debbie McGrath, and I manage the Executive Advisory Services team as Jeff mentioned. So, I have a team of specialists, and we focus specifically and work with our financial advisors, their clients, and many hundreds of issuers in multi Yum! Brands, and the design and implementation of trading plans. Our expertise is really in executive compensation, other SEC rules such as Rule 144, which we simply changed as you probably know, and also impact on Section 16 as it relates to executive officers and directors.

 

                                    With that, I’ll turn it over to you, Sean.

 

Sean O’Brien:           Great. Thank you. Hi, I’m Sean O’Brien. I currently manage Equities Sales and Trading for Merrill Lynch Wealth Management. In this role, I’m fortunate to be able to work with corporate executives as they consider diversifying out of their concentrated holdings. Prior to this role, I spent close to 20 years on the floor of New York Stock Exchange as a specialist, their designated market maker. I also spent two years managing relationships with over 600 of our listed public companies, and I could tell you there’s nothing more exciting than to watch a team ring the bell for the first time as they bring their baby public.

 

                                    So, between helping to bring companies public through IPOs and daily communications with CEOs and CFOs and IR professionals, I have a unique appreciation of both today’s complex market structure, as well as the company’s need to deliver a message of confidence to the investing public as these insiders actually sell their shares. So, I love being able to join this call and share our insights and firsthand experience.

 

Jeff Markham:          Okay. Thank you, Sean, and I’m going to take the first question over to Debbie to get us started with an overview. Debbie, when we’re working with executives and insiders, SEC Rule 10b5-1 plans are very important to them. They’re important to consider and to be knowledgeable about when you’re working with these executives. At the same time, we know that they’ve just implemented some impactful amendments. Can you take us to the background of the rule and then some of the recent changes?

 

Debbie McGrath:      Thanks, Jeff. Sure. So, just to take a few minutes on the background, the SEC adopted Rule 10b5-1 in 2000. So, it’s been around and in use for about 23 years now. This rule was designed to provide an affirmative sense against the claim of insider trading for insiders. So, our panel today is going to really focused on clients, the two-legged clients not issuers which it also could be used for, but we’re talking about how it would impact corporate executives, who will commonly now use a trading plan or it could be a contract or an instruction. Merrill uses a trading plan, a written document. It’s a contract similar to many of our competitors. Insiders will enter into a plan in good faith and at that time that the insider is not aware of material nonpublic information about the shares or the issuer.

 

                                    Now, over the year since the introduction, the use of plans has been increasing, and I think it’s really a result of two things. One is many companies, when we first were introduced, many companies had to go to their boards and get the use of trading plans within their insider trading policy. So, now it’s very common for companies to have already done that. But another key reason why I think they’re increasing is, as we continue to educate about what the considerations and benefits could be with trading under a plan, we see that more and more insiders and companies are using them as just good corporate governance.

 

                                    In fact, there’s a company insight who’s published some analytics about the use of plans. What they found was, back in 2004, only about 30% of the trades done by insiders were under plans. That number has grown to over 60% when you look to 2020. So, plans are, as we mentioned, the primary benefits why it was introduced was for an affirmative defense, but it’s really helpful for corporate executives who receive a large portion of their compensation and equity awards to use a plan, to really a disciplined approach to get out of company stocks because it becomes very concentrated over a period of time. So, they’re really a good tool as we’ll be discussing for strategic diversification or liquidity.

 

                                    But the use of plans really does go beyond just the C-suite. I’ll give you a couple of examples. Pharmaceutical companies, technology companies very often will have their insiders trade under plans. So, you can just imagine, with pharmaceutical companies, you had your scientists working in research, working on drug trials and perhaps there’s news coming out about a certain drug and how they’re doing in the trial or there are rumors or actual mergers of the companies. Well, these individuals may be blocked out for long periods of time unable to sell their stock. So, that is a good example of where many people in the company would benefit from the plan.   

 

                                    We recently, over the last couple of years, had a new client recently IPOed, a smaller company. I’d say about 300 people in the company who freely share certain information like how they were doing with sales. So, they implemented a policy that if anybody was going to sell company stocks that they have to do so under a plan. So, I think that the key point is, from a practical standpoint, plans not only provide or may provide an affirmative defense, but they actually give insiders more time to be in the market trading and to identify prices in the plan that they would be comfortable selling at. So, if the stock, the market price of the stock reaches the limit price that the client puts in, the stock is sold. If the stock never gets to the price that the client was looking for, the stock remains unsold.

 

                                    [Crosstalk] Go ahead.

 

Jeff Markham:          Debbie, that’s great. So, what’s changed as of February 27^th when the SEC amended rule? What do we need to be aware of?

 

Debbie McGrath:      Yes. Thanks. I think one of the bigger changes has to do with the fact that, prior to the rule change, there was no SEC requirement about a cooling off period. A cooling off period is really defined as when a client signs a plan, how long they have to wait before their first trade can be entered and potentially executed under the plan. The SEC said if you’re an executive officer and director, that mandatory cooling off period is the later of 90 days from the date that you signed the plan or modified plan or two business days following the disclosure of the issuer’s quarterly financial reports. So, this is detention with a 10k for the fiscal quarter of when the plan was adopted, but it’s not to exceed 120 days. Everyone else, all other insiders, have a cooling off period of 30 days.

 

                                    So, this is really no big surprise. I think that over the last number of years, there’s been a lot of talk about tightening things up and many companies already required cooling off periods. Maybe not quite 90 days, but it wasn’t uncommon for a company to come in and have their own cooling off period for executive officers and directors.

 

Jeff Markham:          Debbie, thank you. Hey, Gayle, it wasn’t a big surprise to Debbie. Was it a surprise to you when they announced the cooling off period?

 

Gayle Hobson:           Not at all. As a matter of fact, I digested the 250 pages of the rule multiple times. Saw all the feedback from the proposed rules where they initially said it would be 120-day cooling off period. So, when they came out with the 90- to 120-day cooling off period, I think that was the SEC’s efforts to sort of satisfy some of the people who complained, but in my view, it made it more complicated. [Laughter] So, we were not surprised by the cooling off period at all. As Debbie said, we were one of those companies that already had a 30-day cooling off period for Section 16 insiders.

 

                                    So, our non-Section 16 insiders, we at Yum! called in restricted employees so they are still restricted to trade during open stock trading windows just by virtue of their position with the company. We did not have a cooling off period for them, but I think a 30-day cooling off period for them is really not a big deal. It’s really the 90- to 120-day cooling off period for insiders that’s going to give people some indigestion. In addition to having conversations with Merrill Lynch on this cooling off period, our insiders are definitely going to be looking to us and the Law Department to help them understand. It’s not an easy calculation when you’re trying to figure out to do a 90 or 120 and you’re trying to take into consideration your Q and K filing. For me, unfortunately, it means I’m going to have to do some math which is never a good thing for our company.

 

Jeff Markham:          [Laughter] That’s great. Debbie, do you have anything to add?

 

Debbie McGrath:      I guarantee, Gayle, we can help you out on that to simplify the process, so no worries there.

 

Gayle Hobson:           We’re going to rely on you heavily. [Laughter]

 

Debbie McGrath:      Good.

 

Jeff Markham:          Anything to add there, Debbie?

 

Debbie McGrath:      Well, not so much with the cooling off. I do think that one of the benefits that I see is it’s a great opportunity for advisers to get with their clients and to really spend time looking and thinking through what the clients are trying to achieve and what transactions they may be contemplating over the course of the year. So, it is a little bit more, but if you do the planning upfront, I think it’s going to work out just fine. In fact, I looked at some of our stats of where we are versus the same period of last year, we find that executive officers and directors are committing more than 53% more into their plans than they did last year. So, to me it’s a disciplined approach and a good time to really look and think things through.

 

                                    Speaking of that, Jeff, I was going to just jump into the second change, if we can.

 

Jeff Markham:          Sure. Yes.

 

Debbie McGrath:      So, in addition to the cooling period, the SEC has a limitation on what they call multiple overlapping plans. There are some exceptions that they made. So, for example a sell-to-cover plan, which is used when someone receiving a restricted stock awards has to sell a portion of that award when it vests to pay their taxes. So, that’s carved out as an exception, and there’s another carve out we call it a later commencing plan, and this is where a client may be trading under an existing 10b5-1 plan, and they want to adopt a new plan when the window is open, but the new plan can’t start until the first one has finished executing or it reaches its natural end date.

 

                                    So, we think that’s helpful. What we’re seeing is, again, more discipline in putting plans in place. I’ll give you an example.  From the design perspective, we sit down with clients and we ask them, “Okay. What is it that you think you’re going to need to sell over the course of the year?”  Additionally, they may be receiving stock options that could be expiring or restricted stock, as I mentioned, that could be vesting, performance awards, you name it. So, they would actually craft the plan within. We would be stenciling or creating that plan as an individual receiving equity awards, but then we also look to see if there’s any other state planning transactions whether it’d be a trust that they have to sell shares in.

 

                                    So, that’s combined into one document, one contract, but it’s in two different capacities individually and as trustee. It has different selling schedules where the stock is really being sold at multiple accounts, but from the standpoint from the SEC, it’s one plan with different selling scheduling. So, I think it’s again a situation of just discipline.

 

Jeff Markham:          Oh, that’s great.  Sean, I’ve got a follow-up question for you to what Gale and Debbie were talking about. Have you seen an increased demand for open window trades prior to or in addition to writing and signing plans?

 

Sean O’Brien:           Yes. It’s interesting. I think to Debbie’s point, whenever we sit down with a client, we want to focus on what was the client’s concern and what are we trying to achieve, right? It’s interesting. Actually, if I actually speak to a client, who doesn’t need a 10b5-1 plan, I might actually suggest if we had to write one, what would it look like, right? In other words, again, with Debbie’s point, it’s the discipline. So, from a trading perspective, we want to consider all potential solutions.  To that point, once we understand what the client’s needs are, and they have a good understanding of what the underlying security frankly will allow us to do, the liquidity of the underlying security, we want to focus on many multiple potential strategies, right?

 

                                    So, to your point, if the client is trying to raise a certain amount of money and we look at what the average daily volume might be, we also get a sense of last sale, right? Where is the stock trading currently? What do we estimate the impact might be, and what can we sell without impacting the market or influencing the stock? Then we definitely going to want to reach out to Bank of America Securities, maybe the equity capital market team, or to our equity trading team, to potentially trade their inner block, a principal block in that window, or maybe trade over certain number of days within three days before the actual filing, right?

 

So, it’s definitely important to understand the client’s concern and what the market actually will be able to absorb. To your point, yes, it’s not uncommon for us at all to leverage both the block or an open window trade, and the 10b5-1 plan. It’s really about balancing our client’s concerns and their sense of urgency.

 

Jeff Markham:          Well, thanks for that clarification and kind of wisdom as you’re sitting there and taking all these orders in. Again, when we go back to what Debbie referred to as the overlapping plans or used of multiple plans, what’s been the feedback of the Yum! Brands?

 

Gayle Hobson:           So, for us it’s really not much of a change. So, we’ve always sort of allowed what we call back-to-back plans, which basically, we’ll allow an individual during an open stock trading window to put a second plan in place as long as it doesn’t begin trading until the conclusion of the first plan. So, we actually prohibited trading under two different plants prior to these new rule changes. So, for us, this is not impactful at all. We’ve always allowed this to happen and, to Debbie’s point, about how shares are held differently, you can put multiple types of securities into one plan.

 

                                    So, for us we have shareholders, who are insiders, who have family members. They own shares and a trust and we will allow all of those types of transactions to go into one plan provided those shares of course are at Merrill Lynch which we’ve given that direction to some of our insiders previously that if you want to do a 10b5-1 plan the cleanest way to do that is to have all the shares at Merrill Lynch, do one 10b5-1 plan, and we don’t have to worry about 10b5-1 plans with different brokers.

 

Jeff Markham:          Thank you. Debbie, I understand single-trade plans were also impacted. Can you elaborate?

 

Debbie McGrath:      Thanks, Jeff. Yes. This is, I think, the toughest plan surprisingly enough. What the SEC came out and said is that an insider may adopt only one single-trade plan in any 12-month period. Of course, the sell-to-cover plans are an exception to that limitation. The good news, I think, is we see very few single-trade plans. That’s just generally not what our clients are using plans for. Then the question really comes, I think, down to what is a single-trade plan. Gayle, I’m glad you’re on because I know you read, from top to bottom, that 300-page rule definition. But, is a single-trade plan just one trade that the client puts in or what happens if a client puts three trades into a plan? They all have different limit prices. They go in. They started to be traded on a different month, but over time they all execute on the same day. So, it really has a number of us scratching our heads. 

 

                                    We’ve been on a number of calls with outside counsel kind of talking through this issue. Our hope is that the SEC maybe during the summer will come out with more definition and explanation about they mean by a single-trade plan, but right now we kind of look to the insiders and to the issuer. Some of our companies have put in the client representations, but the client never meant for this trade or their trades to be a single-trade plan. So, it’s like in the mind of the insider when they designed the plan. Gayle, I don’t know if you have comments on that as well.

 

Gayle Hobson:           Yes. I think, from my perspective, because as the person who’s signing the issuer certificate on the back of the 10b5-1 plan, I’m saying to pretty much the world that I have reviewed this 10b5-1 plan, and I find everything in here to be good to go. We talked to our insiders and in addition to the expert advice they get from your team, Debbie, we are also talking to them and trying to find out the intent. We are reviewing those 10b5-1 plans to see if, in our minds, the intent is actually reflected accurately on the 10b5-1 plan.

 

                                    If I see an individual, who is wanting to put in a single trade in their plan, trust and believe I’m going to do everything in my power to talk them out of it. [Laughter] Just so that we don’t have to worry about tracking any future plans for these guys. So, from our perspective, we’re trying to eliminate single-trade plans. We’re not prohibiting it, but we are trying to eliminate it.

 

Jeff Markham:          Hey, Gayle, real quickly. I understand the amendments also require new disclosure requirements with respect to the number of shares being sold. Can you share how Yum! Brands is handling this?

 

Gayle Hobson:           Sure. So, we’ve always disclosed on Form 4, and I think a lot of other issuers did the same if the trades being reflected on the Form 4 are presented to 10b5-1 transactions, and the same is true with 144. So, that isn’t really too much of a change for us, but filers are not required to check a box on Form 4 that indicates the trades in the document are intended to comply with the affirmative defense provisions of 10b5-1c. And there has to be a footnote [Laughter] that includes the adoption date of the plan. So, where that can get a little sort of hairy for those who are filing on the insider’s behalf is that the Form 4 includes transactions that are present to 10b5-1 plans and transactions that are not present to 10b5-1.

 

                                    So, then the filer who’s most of the time the issuer has to make a decision as to whether to file multiple Forms 4 or to footnote like crazy. So, it’s just extra work that the issuer is having to do. This is true even for plans that were implemented prior to the February 27^th go live date for the new 10b5-1 rule. We still have to footnote now even for those prior 10b5-1 plans.  So, now more than ever, we look to Merrill Lynch to be our trusted partner in our compliance not just our captive broker. So, I would say that, since the implementation of the new rules, we are talking to our Merrill Lynch folks probably twice as much.

 

Jeff Markham:          Debbie, any thoughts there?

 

Debbie McGrath:      Yes. I think Gayle summed it up. I think that people may think that – well, certainly for issuers that puts more work on them. What we try to explain to our clients when they’re thinking about entering into a plan, and the fact that their plan what they’re selling, the number of shares that they’re selling in the plan will be disclosed, it’s generally not the number of shares that they’re selling. What the focus generally is, is the percent of their ownership because, as I mentioned earlier, they receive a good deal of their overall comp in equity awards. Every year, these awards build up, and so at some point they are going to need to sell.

 

                                    So, it’s better to have this disciplined approach, where you’re selling, maybe it’s 15%, maybe at most 20% of what you own. It’s come to, since it’s been so long into effect this rule, I think everybody is aware that this is just something that executives need to do each year as they gain more and more company stock, and it’s not that they’re not bullish on the stock, but it’s just practical, good financial planning and strategy.

 

Jeff Markham:          Thank you, Debbie. Gayle, when you think about the changes in general, do you have messaging concerns? I mean how do you get them out to the employees and the shareholders?  

 

Gayle Hobson:           Yes. So, we begin communicating to our insiders pretty early on about the changes coming. [Laughter] Selfishly, we want to give many 10b5-1 plans in as we could before February 27^th, but now with all the increased disclosure, the Form 144 is now filed electronically. It hits Bloomberg instantaneously. Then, of course, we’ve got disclosures, and I think I’m talking ahead a little bit here, but there’s increased issuer disclosures sort of all over the place. Whenever you do have these increased disclosures, folks come of the woodwork, and they start asking questions. You may even have some media asking questions.

 

                                    So, for us, it’s super important to get in front of it with our Public Relations Department. They’re typically the ones that our company anyway that field both calls. Kind of like Debbie was saying, when you’re looking at their overall ownership position, that’s the important part, and that’s the message that we have to get out there to the world is, “Yes. It may look like there’s a lot happening here, but if you look at the total ownership of this individual, it’s a drop in the bucket.” So, for us, we are being very mindful of Q&A documents to give our public affairs folks.

 

Jeff Markham:          Right. Thank you. From an issuer’s perspective, are there other disclosures we should all be aware of?

 

Gayle Hobson:           Yes. I think the sort of what I would consider a bit gnarly provisions include a few things. So, we are going to be required to make quarterly disclosures, relate them to 10b5-1 plans that are used by our insiders, and those quarterly disclosures require us to give what I would say pretty detailed information about those 10b5-1 plans. So, it has to give the key elements of the plans. This means that careful consideration must be given to the numbers report on the Form 144, the Form 4, because somebody out there is going to compare all three and see where there are differences. So, not that there won’t be differences, but we need to be able to communicate why they are different if in fact they are. So, again, we’re going to need to work with Merrill Lynch on some of this.

 

                                    Issuers have to annually disclose their insider trading policy, and those insider trading policies now must include their internal 10b5-1 requirements and processes. So, if we say this is what we are doing with our 10b5-1 programs, then we really need to be doing that with our program whereas before there was no insight into what we were doing. It was sort of we’ll do this and no one will know any different. Well, that’s not true now. So, it’s a lot of scrutiny for the issuer. It requires a lot of charts and tracking, and it’s just a lot more work than what most people may realize until they start digging into it.

 

Jeff Markham:          When we think about the scale, how many employees are – who uses a Yum! Brands? Who’s leveraging 10b5-1 plans and have there been any notable surprises since the changes in February?

 

Gayle Hobson:           So, for us, I would say that our board of directors, who are obviously also insiders, they traditionally do not use 10b5-1 plans. Although, it has happened in the past, but our Section 16 insiders are big users of these plans, and for good reason because at any given time we may close a start trading window and not allow sort of some of those trades we were talking about earlier the block trades and so forth. So, it’s important for those guys to really be meaningful about putting those plans in place.

 

                                    I would say that our restricted population is a really big user of these plans. For those guys, they just want to put it in place and forget about it and not have to worry about it in the future.  So, we’re purposefully communicating these new rules and we are really encouraging the continued use of these plans. I think the scrutiny, because of these disclosures, could cause a person not to want to put a plan in place, but we’re trying to assure our insiders that we’re on top on this [Laughter] and that the disclosures will not hurt them in any way.

 

Jeff Markham:          Thanks. Hey, Sean, let me come back to you. When are you involved with helping build out a 10b5-1 trading plan for a client? From your perspective, what should a client consider when they’re constructing a plan?

 

Sean O’Brien:           Great, Jeff. Thank you. During a good week, Debbie and I are on the phone together twice a day, right? [Laughter] Again, it’s important to know that Debbie and I are on the phone together to understand what the client is trying to do and understand how do we do it legally, right? So, we can’t say that’s enough. An effective 10b5-1 should be based on the client’s concerns or needs, right? I’m going to hammer that home, right? So, we want to establish a notional target for the plan. What is the minimum that we need to raise, right? Jeff, you know this. When I was down in Texas in 2014, 2015 with the price of crude, can we address a concern and can we do it in the front months?

 

                                    We also want to look at the historical charts and discuss maybe aspirational levels, right? At what levels would an executive maybe sell more shares, as well as to establish maybe a bail-out level? Is there a price level where we want to make sure we’ll trade down to a lower level just to ensure we raise that notional level, right? I’ve gone so far as to speak to one of our tax sector specialists to say how this stock trade? He’s like, “Oh, that stock trades between five times and nine times revenue, right?” I actually some price points there.

 

                                    So, you can get granular. At the same time, we know that executives must consider the messaging to the street, right? I mentioned I spent close to 20 years on the floor of New York Stock Exchange. I had the good fortune to work directly with CEOs, CFOs, treasurers, head of investor relations, and clearly, there’s a focus on when they sell those shares how is the market going to interpret that, right? I have a unique appreciation of both the fragmentation of today’s market structure, as well as that significance of even the corporate access for portfolio managers to the executives, right, the investing public.

 

                                    So I think, to that point, today’s market structure is so much different than what it was 20 years ago when I was on the floor, right? There are so many different places to trade and what’s the purpose? Today’s structure is there because the portfolio manager, the investor at the mutual fund, the pension fund, wants to add your stock to their portfolio, but they don’t want to push the stock up 5% or 10% to get to that position. In that same way, we know that our executives are trying to sell shares, right? We also know we want to be able to find that institutional portfolio manager that’s looking to add the shares, right? You have to have the right tools to do it, right?

 

                                    As traders, our job is to marry the individual’s diversification concerns with the corporation’s desire to message insider confidence, at the same time the insiders are actually to diversify, right? It’s not easy to do. We appreciate the tremendous responsibility as we trade the selling supply for those insiders, right? Like I said, it’s not easy to do. The average share size today is close to 100 shares. There are more than 25 public exchanges. There are more than 30 alternative trading systems or “dark pools,” right? Those dark pools are systems that allow buyers to meet sellers anonymously, controlling the information flows, right?

 

                                    So, to truly protect the information of these orders and reduce the trading impact as we sell for these plans, the desk has to have the right tools or it has the right tools to get this done. So, I think we have found success by understanding each individual stock’s personality, the average daily volume, the historical charts, understanding the investor base, understanding who owns the stock and who may be looking to add to those positions, and then leveraging our own sophisticated trading tools, as well create as our access to our institutional trading partners at Bank of America Securities, right?

 

                                    Can we find the portfolio, managing that through them? Can we leverage their ability to commit capital? Then the plans, as they’re entered as live orders on the desk, we want to be considerate of all the plans in aggregate, right? So, the ability to take one order, one client, put them all together with other insiders or executives, and really be thoughtful and considerate. Because at the end of the day, if you are at multiple firms or you don’t have the ability to coordinate or can be considerate of each other’s plans, guess what? You’re actually competing with each other, right? You’re actually racing out the door, competing with each other as you’re looking for buyers, right? So, it’s really important to leverage that ability.

 

                                    One last point, once the plan is signed, we can no longer speak to the client. Consequently, it is not uncommon for us to be on multiple calls to ensure that we understand the instructions firmly before the plan is actually signed, and then we get to work. I mean, I love that question. Thank you.

 

Jeff Markham:          No, absolutely. I’ve got a follow-up question. Debbie and Sean, for corporation who works with a brokerage firm for its corporate equity plans, can they work with somebody else on their 10b5-1 plans? Debbie?

 

Debbie McGrath:      Thanks, Jeff. Yes, so this is some - I’m just going to throw it out there. It’s a tough question for me because I’m admittedly biased. Similar to Gayle, I’ve been with Merrill for over 30 years. I know she’s been doing what she is doing for over 34 years. I think that, as Sean mentioned, it just reminds me of the team of resources that come together with the advisor as the central point of contact with the client. We all come together with specific skills and experience to make it the best experience it could be for the client and trying to get them to a place where they are looking to feel really good about what they’ve done.

 

                                    I think that where we could be very different from some of the other firms out there, but I know what we deliver is a client-focused approach. So, the more that we can put our clients in front of our advisors that have been trained on executive compensation, SEC rules, Sean and his team come together about trading expertise, the better it is. I’ll leave at that. I don’t know, Sean, if you want to add more to that.

 

Sean O’Brien:             Yes. As we said, we have a very unique and I think powerful platform. So,  it’s like not shocking that advisors will call to desk to discuss their clients because of our platform and process even on the shares, they’re actually siting at other brokers/dealers, right? So, many companies have moved away from stock option grants and awarding executives with RSAs. These awards will hopefully continue to be received year after year. Once these are vested, the clients should be able to move the stock to their broker of choice, right?

 

                                    We want to have meaningful conversations and be able to implement effective solutions for our clients and their companies, right? We clearly appreciate the long-term impact of these financial impact conversations. So, like Debbie said, it’s a tough question because we certainly want to help, and if anyone’s on this call, clearly you’re already our client, right? So, we want to be able to helpful and thoughtful, but clearly we’d love to be able to do it ourselves and use the tools and resources that we have.

 

Jeff Markham:          Hey, Sean, thank you.  Hey, Gayle, as we wrap up here, I just want to first of all say thank you so much for taking the time out to really help others and help us as we answer questions to our clients. Before we let you go, just any last words of wisdom for those listening in?

 

Gayle Hobson:           Thanks, Jeff. My closing comments would really be focused towards issuers. I would say that they need to buckle up for a bumpy ride over the next couple of years as they work through their processes. Even if they have things sort of legally compliant, it takes a while for any new system to run smoothly. Now more than ever, I think it’s important for issuers to form strong relationships with and rely on the experience of their Merrill Lynch team.

 

Jeff Markham:          Thank you. Debbie, thank you for your expertise and how you support all of us day in and day out. Any last comments?

 

Debbie McGrath:      No. Jeff, the only thing I would say is that we’re all here if anybody has any questions. We’re more than happy to share the information we know and to guide people as best we can.

 

Jeff Markham:          Great. Debbie, thank you. Sean?

 

Sean O’Brien:           I’ll be honest, Jeff. There’s nobody luckier than I am.  I spent 20 years on the floor of New York Stock Exchange. It was great to be able to work with listed companies as they went public. I really recognize that I was a partner as they’re stocks were trading on the floor, but the conversations that we’re having today around 10b5-1 plans, they’re so much more meaningful. I love being able to listen to our clients. I love listening to how they built their companies, and then I love listening to the goals. Understanding the goals and what they’re trying to attain. We may hear about the client’s charities, their beneficiaries, and future generations, right? So, I get it. This is really important. I tell you. I love when our clients actually say, “Thank you,” because I know at that point we’ve made a real impact and that’s something that I didn’t experience on the floor of the New York Stock Exchange. So, I’m really lucky to be able to sit in this seat and have these conversations and work with Debbie and Gayle and you. So, thank you for including me.

 

Jeff Markham:          Oh, absolutely. I thank all of you who have joined us today. Gayle, Debbie, Sean, your expertise and your passion for serving the clients, it just comes through in your voices. If you do have any questions, please feel free to reach out to any of us you’ve heard today or to your financial advisor. Thank you all for listening in and we hope you have a [Audio Gap] of the week.

 

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