The SEC voted Wednesday to provide disclosure relief for certain securities offerings related to employee compensation, and to seek public comment on ways to modernize its rules for employee stock compensation.
Rules adopted Wednesday raised the threshold for the aggregate sales price or amount of securities sold in compensatory arrangements that require an issuer to deliver additional disclosures to investors. The threshold increased from $5 million to $10 million for any 12-month period.
The rules amend Securities Act Rule 701, which provides an exemption from registration for securities issued by nonreporting companies for employee compensation.
Meanwhile, the SEC is seeking comments on how to modernize rules related to compensatory arrangements to accommodate evolution in the types of compensatory offerings and the composition of the workforce. The concept release issued Wednesday seeks feedback on:
- Gig economy relationships and how they might provide a basis for contractors of a company to be eligible for employee stock compensation under the Rule 701 exception.
- 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 for employee benefit plans should be streamlined. Form S-8 provides a simplified registration form for companies to use to issue securities for employee stock purchase plans.
"The rule as amended, and the concept release, are responsive to the fact that the American economy is rapidly evolving, including through the development of both new compensatory instruments and novel worker relationships — often referred to as the 'gig economy,' " SEC Chairman Jay Clayton said in a news release. "We must do all we can to ensure our regulatory framework reflects changes in our marketplace, including our labor markets."
The rules amendments will take effect upon their publication in the Federal Register, and the public comment period on the concept release will remain open for 60 days following publication in the Federal Register.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.