One week prior to the IPO, Sahara’s board of directors approves and implements an employee share option plan (ESOP). Existing staff members are allocated 10% of the upcoming IPO at a 25% discount to the IPO price. Omar acquires his allocation with the intention of selling his shares at a profit after trading commences. The details of the ESOP are highlighted in the IPO prospectus.
Q. Does Omar’s participation in the ESOP most likely violate any of the Standards of Professional Conduct?
- Yes, with regard to conflicts of stock ownership.
- Yes, with regard to priority of transactions.
Why not priority of transactions since all shares from IPO should be allocated to clients first?