SA Rule 701: Compensatory Securities Offerings

Overview

SA Rule 701 exempts from Securities Act registration requirements certain sales of securities made to compensate employees, consultants, and advisors. This exemption is not available to issuers that already are required to file reports under Exchange Act Section 13(a) or Section 15(d).

An issuer can sell at least $1 million of securities under this exemption, regardless of its size. An issuer can sell a higher amount if it satisfies certain formulas based on its assets or on the number of its outstanding securities. If an issuer sells more than $10 million in securities in a 12-month period, it is required to provide certain financial and other disclosure to the persons that received securities in that period. Securities issued under Rule 701 are ‘‘restricted securities.’’ Compensatory Benefit Plans and Contracts, Release No. 33–6768 (Apr. 14, 1988) [53 FR 12918 (Apr. 20, 1988)] (‘‘Rule 701 Adopting Release’’). See also Concept Release on Compensatory Securities Offerings and Sales, Release No. 33–10521 (Jul. 18, 2018) [83 FR 34958 (Jul. 24, 2018)] (soliciting comment on possible ways to modernize rules related to compensatory arrangements in light of the significant evolution in both the types of compensatory offerings and the composition of the workforce since the SEC last substantively amended these rules in 1999). [check that these releases are on the system]

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  • SA Rule 701 (Exemptions for securities sold percentain to compensatory benefit plans and contracts relating to compensation)

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