The SEC proposed amendments that would expand exemptions from registration related to securities issued by non-reporting companies for certain compensation plans. (See also this related action, in which the SEC proposed to allow internet platform companies to partly compensate gig workers with securities.)
The proposed rule would amend SA Rule 701 ("Exemption for offers and sales of securities pursuant to certain compensatory benefit plans and contracts relating to compensation") to:
- update the disclosure requirements for exempt transactions that are over $10 million, including the application of the disclosure threshold, the required financial disclosure type and how often such disclosures should be updated;
- revise the date by which disclosures must be provided on derivative securities which do not require a decision by the recipient to exercise or convert such derivative securities;
- increase certain of the ceilings as to the maximum amount of securities that can be sold by a non-reporting issuer under the exemption during a 12-month period; and
- make the exemption available to subsidiaries of an issuer with a written compensatory benefit plan, regardless of whether a subsidiary is majority-owned.
The proposed rule would also amend Form S-8 to:
- clarify the ability of issuers to (i) add more than one plan to a single Form S-8, (ii) designate securities among more than one incentive plan on a single Form S-8 and (iii) add securities or classes of securities through "automatically effective post-effective" amendments;
- simplify the share counting and fee payments portions of the form by (i) mandating that issuers register the aggregate offering amount of securities for defined contribution plans, (ii) putting in place a new fee payment method for offers and sales registration under defined contribution plans and (iii) conforming its instructions with those of the IRS' current plan review practices; and
- remove the requirement for issuers to describe the tax impacts on the issuer of participating in the plan.
Comments on the proposal must be submitted within 60 days of its publication in the Federal Register.
Commissioner Statements
In a joint statement, Commissioners Allison Herren Lee and Caroline A. Crenshaw stated that the amendments provide "tailored adjustments" to improve the application of the rules for all market participants.
Primary Sources
- SEC Press Release: SEC Proposes Amendments to Modernize Framework for Securities Offerings and Sales to Workers
- SEC Proposed Rule: Modernization of Rules and Forms for Compensatory Securities Offerings and Sales
- SEC Statement, Allison Herren Lee: Proposal to Facilitate Non-Cash Compensation for Certain Gig Workers
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