The Section 16 Insider Who Wants to Sell $1.5 Million in Eight Months

Sequencing comes first, because the window is closing. With a blackout 11 days away, the only defensible route for an officer is a Rule 10b5-1 trading plan adopted now, while he is not aware of material nonpublic information, inside an open window and after company pre-clearance. Under the amended rule, as a director or officer his cooling-off period is the later of 90 days after adoption or two business days after the Form 10-Q/10-K for the quarter of adoption is filed, capped at 120 days. That means the plan will not execute for roughly three months, so the vacation property purchase must be funded from the taxable account or a bridge, not from sale proceeds in eight months.

Market impact. At 180,000 shares ADV, a $1.5 million block is manageable if sliced to 10–15% of daily volume across scheduled dates; a single block invites price concession and 16(a) scrutiny.

Tax. Direct the broker to sell highest-basis lots first and to specify lots at trade time; RSU basis is FMV at vest, while ISO shares require separating qualifying from disqualifying dispositions, since disqualifying treatment converts the spread to ordinary income. Before selling, consider gifting the lowest-basis shares to a donor-advised fund, which removes the gain entirely and produces a deduction at fair value.

Do not fold the answer into a collar or prepaid forward without checking constructive-sale rules and disclosure obligations.

This is a suitability and fiduciary-documentation problem, not a product problem. Start by quantifying what he is actually accepting: 1.5 million shares worth roughly $4.2 million against a reduced net worth of about $4.1 million after the sale, meaning more than 100% of his liquid net worth in one stock. Show him the arithmetic: a 40% drawdown in the stock would erase close to two years of his $170,000 retirement spending, and his human capital is already 100% correlated with the same firm.

Then separate the decision from the signature. You cannot require him to adopt a 20% cap, and he cannot require you to document a recommendation you do not believe in. Offer a written client-directed instruction that states the concentration, that you advised against it, and that he accepts the risk and will revisit it annually. Confirm the firm's policy on concentrated positions; some policies prohibit accepting or retaining accounts above a threshold without committee approval.

If he refuses even to acknowledge the risk in writing, escalate to compliance. Continuing to service the account on an undocumented, unsuitable instruction is the exposure. Schedule a review trigger at each vesting event and each open window, because concentration will otherwise re-accumulate silently.

The file should let a examiner reconstruct your reasonable basis without talking to you. At minimum:

• An updated IPS or written client instruction recording goals, time horizon, liquidity needs, risk tolerance, the 20% concentration discussion, and Marcus's refusal to adopt a cap.
• A copy of the executed 10b5-1 plan, the company's pre-clearance approval, and the date-stamped confirmation that the plan was adopted in an open window while he was not aware of MNPI.
• The lot-level tax analysis, including which ISO shares are qualifying versus disqualifying and the ordinary-income consequences, plus evidence that lots were specified at the time of trade.
• The source-of-funds analysis for the vacation property, showing that the purchase does not consume the emergency reserve or force a sale during a blackout.
• Correspondence, including the daughter's or spouse's involvement if any, and the meeting notes that document the concentration warning.

Also note the rebalancing mechanics for the $600,000 managed account, since new contributions should be directed to bonds rather than raising equity exposure further. Diary an annual concentration review and a trigger to revisit the 10b5-1 plan size when the next window opens; plans amended outside a window are a red flag.