SEC Proposes Amendments to Modernize Framework for Securities Offerings and Sales to Workers

The Securities and Exchange Commission has voted to propose amendments to Securities Act Rule 701 and Form S-8, designed to modernize the framework for compensatory securities offerings in light of significant changes in the employment landscape. The proposed changes aim to provide workers with the opportunity to share in the growth of their companies while maintaining important investor protections. The proposals are informed by public comments received in response to the Commission's July 2018 Concept Release on Compensatory Securities Offerings and Sales.

Key Takeaways:

• The proposed amendments to Rule 701 would revise disclosure requirements for exempt transactions exceeding $10 million, including the type of financial disclosure required and the frequency of updates.
• The amendments would also raise alternative regulatory ceilings that cap the overall amount of securities a non-reporting issuer can sell under the exemption.
• With respect to Form S-8, the proposed amendments would simplify registration by clarifying the ability to add multiple plans to a single form and implementing a new fee payment method for registration of offers and sales pursuant to defined contribution plans.
• The proposals would also extend consultant and advisor eligibility to entities meeting specified ownership criteria and expand eligibility for former employees to specified post-termination grants and former employees of acquired entities.
• The comment period for the proposal will remain open for 60 days following publication in the Federal Register.

Statistics:

• The Securities and Exchange Commission received public comments on possible ways to modernize the Rule 701 exemption and the relationship between the exemption and Form S-8.
• The proposed amendments to Rule 701 aim to modernize the framework for compensatory securities offerings, consistent with investor protection.
• The proposed amendments to Form S-8 would simplify registration on the form, including clarifying the ability to add multiple plans to a single Form S-8.

Sources:

• M2 PRESSWIRE-November 24, 2020-: SEC Proposes Amendments to Modernize Framework for Securities Offerings and Sales to Workers
• Securities and Exchange Commission. (2020). Modernization of Rules and Forms for Compensatory Securities Offerings and Sales. Fact Sheet.
• Securities and Exchange Commission. (2018). Compensatory Securities Offerings and Sales: Concept Release. Release No. 33-10779.