CCD – Almost correct but some exceptions.

It appears that it might be possible to exercise options during a blackout or maybe not. The first link below is to a US explanation with a quote from it immediately below it. Red highlighting is by me. The link lower down is to a TSX explanation. Barring any prohibition placed by the company itself, it would appear that the key thing is that the parties involved all know the undisclosed material information. Under no circumstance can the acquired shares be sold into the open market before the information is disclosed. A cash settlement for the options exercise is okay because it is between the options holder and the company so both parties should know the undisclosed information. As soon as some party (like the open market or an individual) that doesn’t know the undisclosed information is involved, there is insider trading by those in the know.

https://media2.mofo.com/documents/131205-is-exercising-employee-stock-options-illegal-insider-trading.pdf

“Nevertheless, in many cases, the insider who is aware of non-public positive information that will move the market thus is in a position to obtain shares by exercising her stock options before the announcement, as long as she exercises those options by paying cash for them or via net settlement. On the other hand, people in possession of material non-public positive information obtained as insiders or pursuant to a duty of trust or confidence typically cannot purchase shares on the open market prior to the announcement without committing insider trading.”

Although, not as well explained as the US version above, below is some information copied from the TSX that refers to a period where the company prohibits exercising stock options. It would appear that a company can make this determination themselves and ban exercising if they wish.

https://www.tsx.com/resource/en/438

“The Exchange will not permit an Issuer to grant stock options while there is any undisclosed Material Information relating to the Issuer.

A stock option plan may contain a provision allowing for the automatic extension to the expiry date of a stock option governed by the plan if such expiry date falls within a period (a “blackout period”) during which an Issuer prohibits Optionees from exercising their stock options.”

This is an example I found from an actual TSX listed company’s Stock Option Plan regarding blackouts with the company placing restrictions. I would suppose that they could also extend that restriction to a total ban on exercising within a blackout if they wished.

“Under this Policy, "trading" includes any sale or purchase of securities of the Company, including but not limited to: (a) buying or selling puts or calls or other derivative securities on the Company's securities; (b) the exercise of stock options granted under the Company's stock option plan; and (c) the acquisition of shares or any other securities pursuant to any Company benefit plan or arrangement. Notwithstanding (b) above, you may exercise stock options granted under the Company's stock option plan for cash, but the sale of any shares issued on the exercise of Company-granted stock options apply to the foregoing prohibition.”