SEC shortens settlement date for broker assisted sales of stock to T+1. Are you ready?

Important changes are on the horizon that will have a significant impact on how you handle stock option grants and equity awards. Starting May 28, 2024, the U.S. markets will require a "T+1 settlement" date for broker assisted sales of stock. This change, mandated by the U.S. Securities and Exchange Commission (SEC), aims to protect shareholders and investors by reducing market risk and increasing operational efficiency.

So, what does this mean for your organization? Well, if you grant stock options, these new rules could bring about significant changes in how you handle tax withholding and deposit requirements for taxes due on stock options and other equity awards. Additionally, it will require closer coordination between stakeholders within your organization and any third-party vendors you collaborate with for compensation administration, reporting, and regulatory compliance.

Let's delve into the details. Until 2017, companies had a three-day settlement period (T+3) to settle broker assisted sales of stock. This was then reduced to two days (T+2). Now, the SEC is further compressing the settlement period to just one day (T+1). The rationale behind this change is to minimize the risk of default and quickly address any errors before significant changes in stock prices occur. The SEC even envisions a future where same-day (T+0) or instantaneous settlement becomes the norm, but this will require organizations to implement automated processes.

To ensure compliance with these new rules, it's crucial to understand their implications and take appropriate action. Our article will provide you with a closer look at the new rules, how they might impact your organization, and the steps you need to take to comply.

Confidently navigate these changes by downloading our article now. Don't miss out on this essential information that will keep you informed and prepared.