[dboreham]

Through KYC processes?

They could theoretically conspire with another person who runs the trade but eventually compensates the principal. They'd only be found out through regular white collar crime fighting measures: parallel construction from NSA sigint for example.

[docker_up]

But how would Lyft know that an employee bought puts from E-trade? How is that information shared? I don't think there's any information being exchanged by every single brokerage to Lyft, is there? The lockup agreement is a contractual thing, it's not a legal document. I don't see how Lyft would have the legal rights to search.

[jedberg]

How do the police know that you're cooking meth in your basement? They don't, but if you do something dumb or make a lot of money, they tend to find out.

It's the same here. Buying/selling options on Lyft as an employee is against their employment contract, and probably SEC rules. If they make a few thousand dollars doing it, chances are no one will find out.

If they make a few million, the SEC will probably look into that.

[docker_up]

Why is the SEC involved, especially if there's no insider trading involved? What if a Lyft employee quit a few months ago, and then hedges her RSUs with puts? There's no insider trading involved, why would the SEC care?

[jedberg]

The SEC deals with all trading irregularities and violations, not just insider trading.

The rules aren’t there just because Lyft wants to be mean, they’re there because regulations require it and also because one of the guiding principles is “no perception of insider trading”. That means you have to avoid behaviors that might look like insider trading.

A current or recent insider using hedging is very suspicious looking. What do they know?

When I left Netflix I was warned that I needed to wait at least three months before making any trade other than buy. And I was still restricted to the employee trading window for six months.

[asynchrony]

Employees are normally forbidden from trading any derivatives, short selling, or even buying shares in a margin account.

I’m not sure about the case of an employee that has left the company, but I expect that it would still qualify as insider trading through some window.

[buttcoinslol]

The SEC is the one I would be worried about if I was a Lyft employee that was secretly hedging my locked up shares with put options.

Irregular options activity does get noticed and investigated, take a look at some SEC enforcement actions for insider trading: https://www.sec.gov/spotlight/insidertrading/cases.shtml

[docker_up]

But breaking the terms of the lock up agreement isn't a crime, especially if there's no insider trading involved.

If a Lyft employee quits 2 months ago, and then buys puts on their lockup RSUs, I don't see how this is something the SEC cares about. At worst it's a contractual agreement between the employee and Lyft, no?

[gamblor956]

Lockup agreements are actually between Lyft and the IPO underwriters.

Basically, Lyft would have agreed with the underwriters not to exchange RSUs for the underlying shares of stock, so the employees couldn't sell any shares on the market. The RSUs, by their terms, generally have restrictions on who they can be sold to--usually just back to the company or purchasers approved by the company. If those restrictions are not adhered to, then the issuer of the RSU (i.e., Lyft) can void the sale transaction.

[dboreham]

Some Google searching suggests enforcement would be after the fact so your scenario might well be permitted. Also found that Google searching "insider trading" may not be a good idea...