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ARTICLE · 25 JULY 2018

SEC Increases Rule 701 Disclosure Threshold And Issues Concept Release Regarding Modernization Of Compensatory Securities Offerings

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The U.S. Securities and Exchange Commission unanimously voted on July 18 to adopt final amendments to Rule 701, which provides private companies an exemption from registration...

United StatesEmployment and HR
Scott Spector
Scott Spector
Elizabeth Gartland
Elizabeth Gartland
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Increased 701 Disclosure Threshold

The U.S. Securities and Exchange Commission unanimously voted on July 18 to adopt final amendments to Rule 701, which provides private companies an exemption from registration for options or stock awards granted pursuant to compensatory arrangements. In accordance with a congressional mandate, the SEC increased the financial information and risk factor disclosure threshold from $5 million to $10 million. This new disclosure threshold will allow private companies to have more flexibility under Rule 701 and remain exempt from enhanced disclosure.

The increase will be effective immediately following publication of the final rule in the Federal Register for any 12-month offering that is in effect on the day of publication, including periods for which disclosure has already been made for equity awards granted in excess of $5 million.

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