Does this seem right
 

I've got a some questions for all those financial types and rich people out there...

I'm not rich, but I do work hard, and have been rewarded by building up a fair few stock options in my company over the years. A couple of weeks ago I decided to exercise a block of these options 'cos Mrs Jools has been off work for a year now through ill health and times is 'ard. First time I've ever exercised any and so I'm new to it all, however, the sums just don't seem to add up.

To make it simple I've rounded the numbers, but very roughly the situation goes something like this. The options are for a US based company, so I opened an account with the US based stock broker who deals with this on employees behalf.

I had a block of 300 options that were granted to me at $18 each. I exercised them at a market price of $38, as I say the numbers are rounded but almost exactly $20 'profit' per share = $6000. Brokers charges for the sale were $35.

The broker then converts that dollar sum into sterling, by arrangment with the UK tax authorities they deduct 40% at source and wire me the proceeds (why the wired proceeds then take 10 days to be credited to my account is another story). No tax is liable in the US because I've signed and submitted my W8-BEN form to state that I'm not a US citizen.

Anyway. By my sums I should have been getting $6000 x exchange rate = £3200-ish - 40% tax (approx 1200) = net sum of approx £2000.

A transfer arrived in my bank today for approx £1500. Where has the other £500 gone ???

OK, I know that these sums are only rough calculations and I know that I'm not going to get the listed exchange rate when the broker or bank does the dollar/pound conversion, but even so it shouldn't eat up £500 should it.

My bank have confirmed that nobody this end takes a slice, they just credit my account with the funds that were wired. I'm naturally going to phone the broker, but since I'm green to all this are there any obvious questions I should ask (apart from where's my effin cash)?

none what so ever all adds up perfectly according to your figs. i would check the exercise price was 38 and you were not quoted a 'mid price' and also check their exchange rate, but cant see how it would be out that much.

Jools,

Did you get the schedule of charges in writing from the US broker? If so you should be able to take him to task on that basis. 25% of net proceeds is a hell of a lot of commission to take

check what rate they convert at.
check if they charge a funds transfer charge
check if they charge an administration charge for tax deducation activity

Ditto,

I'd want talking through the brokers calcs with the numbers, someone somewhere has had a breakfast, dinner and tea out of the deal,

Theres some hidden charges, finger trouble or somemat similar somewhere in the chain.

Ray,

Make sure the bank has not added a "negotiation" fee, some of them will and then deny it!

More than likely you paid some sort of "income" tax or lost out in the exchange/tax rate ? 4D

I don't know anything about share option schemes really but thinking out loud, did you own the shares outright or were they still being held in a fund by your company? If you did get the share allocation at a preferential rate in the first place that was dependant upon you holding them for a fixed period (eg 5 years), you may have lost that discount by cashing them in early. i.e. you have now forfeited that discount and effectively had to pay the market rate prevailing at the time that they were allocated to you. So your profit of $20 per share is reduced because you hadn't qualified for the initial discount by cashing them in early.

Other than that, I can't come up with any reason for the missing £500.

How's your cold today, Jools? Have you got a headache now?

Looks like a screw up to me.

The only think I could think it might be is if the broker account requires a minimum balance to be held (eg $1,000 which would correspond to about £500).

Either way, a call to the broker should sort it out.

Depends if you paid tax when they were granted to you really. If not then they would probably be deducting 22% tax on the entire proceeds.....

....see if that would work out to the missing £500

Although re-reading your post appears they are only passing the profit to you....