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Holders of Employee Stock Options Grants are Manipulated against their Own Interests By way of deception, companies and wealth managers create benefits to the companies and get additional Assets Under Management for wealth managers while penalizing employees / clients.There is a continuing scam to intimidate employees into making early exercises of employee stock options which forfeits “time value” and causes an early tax to the employees. This results in the company reducing its liability to the employee/grantees, and receiving early cash flows from the early exercises and getting early tax credits. It also helps the wealth managers to get the employees to sell the stock and then diversify the residual amounts into mutual funds or managed accounts. This strategy also exposes the employees/grantees to highest risks when the stock is substantially above the exercise price with no efficient way to manage those risks.

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Rather than attempting to change the plan document or the grant agreement, which presently allow selling calls or buying puts to reduce risk, the companies try to make the change by way of Insider Trading Policies. They do so because the stock plan and grant agreement does not allow changes that are detrimental to the employee/grantee. So they try to make employees/grantees think that Insider Trading Policies are forced upon them by the SEC and that it is necessary to prohibit selling calls at all times to be consistent with SEC Rule 10 b-5. That idea is 100% fraud.Below are three examples of the fraud, whereby the company claims that the total prohibition of selling calls and buying puts is necessary to comply with the requirement of Rule 10(b) 5, even if done outside of blackout periods or as part of Rule 10(b) 5-1 plans or when the employee has no non-public material information. I could cite many more companies who have similar provisions in their Insider Trading Policy.

. Insider Trading Policies

SEI Advisers Short Selling and Derivatives Trading Prohibition –

All Employees are prohibited from engaging in short sales and options trading of SEI’s common stock.

North Western Corporation October 31, 2011A. Publicly Traded Options Transactions by Board Members or employees in Company Securities involving puts, calls orother derivative securities, on an exchange or in any other organized market, are prohibited. Atransaction in options is, in effect, a bet on the short-term movement of Company Securities andtherefore creates the appearance that the Board Member or employee is trading based on insideinformation. Transactions in options also may focus the Board Member’s or employee’s attention onshort-term performance at the expense of the Company’s long-term objectives. Option positionsarising from certain types of hedging transactions are governed by the section below captioned

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"Hedging or Monetization Transactions.” B. Hedging or Monetization TransactionsBoard Members and employees are prohibited from entering into hedging, monetizationtransaction or similar arrangements involving Company Securities, such as zero-cost collars andforward sale contracts. These hedging and monetization transactions allow an owner of securities tolock in much of the value of his or her stock holdings, often in exchange for all or part of the potentialfor upside appreciation in the stock. These transactions allow the owner to continue to own thecovered securities, but without the full risks and rewards of ownership. When that occurs, theinterests of the owners and the interests of the Company and its shareholders may be misalignedand may signal a message to the trading market that may not be in the best interests of theCompany and its shareholders at the time it is conveyed.

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Opnext Optical Technologies August 2009Avoidance of Certain Aggressive or Speculative Trading Covered Persons and their respective family members (including spouses, minor children, or any otherfamily members living in the same household), should ordinarily not directly or indirectly participate intransactions involving trading activities which by their aggressive or speculative nature may give rise toan appearance of impropriety. Such activities would include the purchase of put or call options, or thewriting of such options.

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Why would the stock plan documents allow selling exchange traded calls but then the Board of Directors prohibits it in the Insider Trading Policy, while the Insider Trading Policy at the same times allows selling of the stock? There is not one bit of evidence that selling “qualified covered calls” or un-qualified covered calls to generate income is more suggestive of betting against the stock than selling the stock itself. In fact, the opposite is true. Angello Mozilo, Richard Fuld, Terry Semel and other CEOs, who unloaded millions of shares prior to the collapses of their stock, never sold calls or bought puts. I would say that chance of an executive selling “qualified covered calls” in violation of 10b-5 is 1000 times less that the chance of an executive selling stock in violation of 10 b-5. I would bet that there never has been a prosecution or a civil complaint against a person or employee for selling “qualified covered calls” or un-qualified covered calls, whereas, there are perhaps thousands of cases where call buying or stock buying led to a Rule 10 b-5 violation.

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The answer is simply that the companies and the wealth managers do not want efficient management of the granted employee stock options and will do everything that they think they can get away with to create benefits to the companies and the wealth managers, even to the extent of defrauding the employee/grantee clients and violating their fiduciary duties to those employees.All of the organizations like NASPP and the NCEO, WorldatWork and the CEPI at Santa Clara and other organizations who cater to the companies and the wealth managers go along with the scam. The welfare of the employee/grantee is never considered. John Olagues “This is the way the world ends, this is the way the world ends, this is the way the world ends. Not with a bang but a whimper”……T.S. Eliot

http://www.amazon.com/John-Olagues/e/B00314DLEYhttp://www.optionforemployees.com/articles