SEC Solicits Comment on Modernizing Rules Related to Compensatory Securities Offerings and Sales | Practical Law

SEC Solicits Comment on Modernizing Rules Related to Compensatory Securities Offerings and Sales | Practical Law

The Securities and Exchange Commission (SEC) published a Concept Release soliciting comment on various aspects of Rule 701 and Form S-8 under the Securities Act, seeking to modernize rules related to compensatory securities offerings and sales.

SEC Solicits Comment on Modernizing Rules Related to Compensatory Securities Offerings and Sales

by Practical Law Corporate & Securities
Published on 19 Jul 2018 • USA (National/Federal)
The Securities and Exchange Commission (SEC) published a Concept Release soliciting comment on various aspects of Rule 701 and Form S-8 under the Securities Act, seeking to modernize rules related to compensatory securities offerings and sales.
On July 18, 2018, the Securities and Exchange Commission (SEC) published a Concept Release soliciting comment on various aspects of Rule 701 and Form S-8 under the Securities Act, seeking to modernize rules related to compensatory securities offerings and sales.
Rule 701 provides a safe harbor from registration under the Securities Act for grants of equity securities by a non-reporting company to its employees and certain other persons under the terms of a written compensatory benefit plan or written compensation contract.
Rule 701(e) states that the issuer must provide investors with a copy of the compensatory benefit plan or related contract. In addition, if the aggregate sales price or amount of securities sold during any consecutive 12-month period exceeds $10 million, as recently amended (see Legal Update, SEC Adopts Amendment to Rule 701 Increasing the Threshold for Delivering Additional Disclosures to Investors), the issuer must deliver additional disclosures as applicable within a reasonable period of time before the date of sale. These disclosures include risks associated with an investment in the securities sold under the compensatory benefit plan and certain financial information about the issuer.
Form S-8 provides a short-form registration statement for companies to use for registration of securities to be issued under employee benefit plans. Form S-8 is available for use by reporting companies that are current in their filings for the past 12 months (or shorter period since becoming a reporting company). Form S-8 is available for the registration of securities to be issued under any employee benefit plan to a company's employees, or employees of its subsidiaries or parents, including consultants, advisors and de facto employees, as defined under Rule 701.
The Concept Release solicits comments on questions relating to:
  • "Gig economy" relationships, or new types of contractual relationships between companies and individuals involving alternative work arrangements, to better understand how they work and determine what attributes of these relationships potentially may provide a basis for extending eligibility for the Rule 701 exemption.
  • Whether the SEC should further revise the disclosure content and timing requirements of Rule 701(e).
  • Whether the use of Form S-8 to register the offering of securities pursuant to employee benefit plans should be further streamlined.
The SEC is accepting comments until September 24, 2018.
To learn more about Rule 701, see Practice Note, Employee Incentive Compensation and the Role of Rule 701.
To learn more about Form S-8, see Practice Note, Registration Statement: Form S-8.