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The Certified Equity Professional Institute (CEPI) is part of the Leavey School of Business at Santa Clara University in California's Silicon Valley. The CEPI was founded in 1989 by a group of equity compensation professionals. Their mission was to establish, promote, and provide certification and continuing education for the equity compensation industry. Since its founding, the CEPI's self-study curriculum has served as the industry's educational standard. Organizations and individuals use CEPI exams as a measurement of basic (Level 1), intermediate (Level 2), and advanced (Level 3) knowledge, skills, and abilities related to equity compensation.
The CEPI's ongoing GPS (guidance, procedures, systems) project has produced a series of books designed to provide impartial guidance for everyone working in the field. This volume combines the four GPS books currently assigned to CEP candidates (Employee Stock Purchase Plans, Restricted Stock and Restricted Stock Units, Performance Awards, and Global Equity Plans), all updated for 2021.
Table of Contents
CEPI Advisory Board
Employee Stock Purchase Plans, 2021 ed.
Restricted Stock and Restricted Stock Units, 2021 ed.
Performance Awards, 2021 ed.
Global Equity Plans, 2021 ed.
From Employee Stock Purchase Plans, 2021 ed.
3.3.5. Plans that have multiple purchase periods within a single offering period may contain a reset or a rollover feature that provides for the termination of the offering period on any purchase date when the share price is lower than it was on the first day of the offering period. The current period purchase is completed as usual, and the day after the purchase becomes the first day of a new offering period.
If the plan has a reset feature, the new offering period will end on the same day the original would have ended. If the plan has a rollover feature, all employees will be rolled into a new offering period that is as long as the original would have been had the rollover not been triggered.
In both cases, the subsequent purchase price in plans with look-back features will be calculated based on the new price (typically the FMV the day after the reset is triggered) or the FMV on the purchase date. The financial reporting impact is reflected on a prospective basis. The prevalence of reset and rollover features has diminished due to the adverse accounting treatment.
3.3.6. Plans may restrict when employees can sell shares or transfer after the purchase. While such restrictions are not common, they are most frequently associated with qualified plans to ensure a two-year holding period from date of grant and a one-year holding period from date of purchase to maximize the employee tax benefits. Restricting the disposition of shares is at the discretion of the company and should reflect the company’s objectives for the plan. For example, if the company’s objective is to encourage share ownership, requiring employees to hold shares for a certain period after purchase achieves that objective. Employees may perceive such restrictions negatively. The inability to sell the shares and access the sales proceeds may reduce employee participation in the plan. This restriction may be particularly difficult for employees enrolled in nonqualified plans and non-US employees since the difference between the FMV at purchase and the purchase price is taxed at the purchase date. The taxable transaction may result in a financial hardship to the employee if the shares cannot be sold immediately to fund the required tax and the required tax is withheld from the employee’s paycheck. In addition administering such restrictions can be time consuming and require close coordination with a designated brokerage firm and/or third-party administrator. See Exhibit 3-7 for a summary of the advantages and disadvantage of restricting sale of shares.