definition of vesting?

Discussion in 'Trading' started by ER9, Oct 2, 2005.

  1. ER9


    Websters defines it as:

    ' the conveying to an employee of the inalienable right to share in a pension fund especially in the event of termination of employment prior to the normal retirement age; also : the right so conveyed '

    This was the keynote on an insider trading form. The person selling the shares sold 29,587 and has 45,413 remaining shares after this sale.

    Explanation of Responses:
    1. Shares withheld to satisfy tax withholding related to restricted stock vesting.

    I'm trying to decipher this transaction and understand what is meant by 'restricted stock vesting'

    I'm assuming it means this person could only sell a certain amount of shares because he is an employee of UAL Corp and is restricted to selling certain amounts of ownership. Sort of how our employer IRA's are handled.

    I'll try and attach the form in question.
  2. ER9


    try this again.
  3. Chagi


    I'm not a legal expert, but yes, vesting tends to mean that you are restricted from selling shares for a period of time.

    For example, the company I work for has an employee share ownership plan, and the company matches a portion of contributions to the plan. I can sell my portion of the shares purchased at any time, but the company's portion (matched contributions) can only be sold every so often once they vest.
  4. "Vesting" simply means that a person has a legal property interest in the subject matter. For example, if your father names you in his Will as sole beneficiary, that is what is known as an "unvested" future interest, because your Father can change his will at anytime prior to death, and your future interest in the Will will change as a consequence. You could get everything or nothing, but you won't know until the moment of your father's death, because until that instant, your interest in the Will has not "vested."

    So, in your hypothetical, the government can't charge a person with having traded on inside information in order to increase their holdings in a stock (restricted or otherwise), unless that person is actually vested in the shares, because if he has no ownership, then he has no stock that can be increased. However, to the extent that the insider has a vested interest, if he trades on inside information, then he is subject to the Federal Securities Law that prohibits such insider trading.