Was that granted as part of a statutory stock option plan or non-qualified stock option plan (NQSO)?

Unless it is an ESPP, the exercise price is usually the FMV on the date of grant.  If NQSO was granted at below FMV, it would be subject to §409A and may be subject to the potentially punitive 20% additional tax and interest charges.

When you say your client paid $4ps, which is valued at $17ps, do you mean the exercise price based on FMV at the time of grant (prior to IPO) was $4ps but the share price at IPO was $17?  If that is the case, the bargain element is ***not*** a discount per se.  It is the exact intention of any stock option plan, which is to incentivize employees to work hard to help the company meet the performance targets and, thereby, increase the share price, so that they can partake in the company's success.