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SEC Approves Amendment to Rule 701 and Issues a Concept Release Regarding Form S-8 and Rule 701

As previously reported edition of June 1, 2018, on May 24, President Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act (the Act), Section 507 of which directs the Securities and Exchange Commission to adopt an amendment to Rule 701 under the Securities Act of 1933. Rule 701 generally provides an exemption from the registration requirement imposed by the Securities Act for issuances of securities by a company that is not subject to the reporting requirements of the Securities Exchange Act of 1934 to its employees, directors and consultants under compensatory benefit plans. Pursuant to Section (e) of Rule 701, if the aggregate sales price or amount of securities sold by an issuer to investors in reliance on Rule 701 during any 12-month period exceeds $5 million, the issuer is required to deliver to investors an additional disclosure, including specified financial statements and risk factors. On July 18, consistent with the mandate under the Act, the SEC issued a final rule amending Section (e) of Rule 701 to increase the threshold for providing enhanced disclosure from $5 million to $10 million (subject to inflation adjustment every five years).

Also on July 18, the SEC issued a concept release, seeking public comment on ways to modernize Rule 701 and Form S-8 (which is the registration statement for compensatory offerings by reporting companies). In issuing the release, the SEC staff noted the significant evolution in both types of compensatory offerings and the composition of the workforce since the SEC last substantively amended its rules related to compensatory arrangements in 1999.

The full text of the release is available here.

The full text of a press release issued by the SEC regarding the Release and the amendment to Rule 701(e) is available here.

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Mark D. Wood, corporate securities lawyer Katten Muchin Chicago Law firm
Partner

Mark D. Wood is head of Katten's Securities practice and concentrates in corporate and securities law. Mark represents public companies, issuers and investment banks in initial public offerings (IPOs) and other public offerings, private investment in public equity (PIPE) transactions, debt securities and other securities matters.

Mark also represents clients in complex corporate transactions, including tender offers, mergers, acquisitions, dispositions, going-private transactions, private equity investments, joint ventures and...

312-902-5493
Mark Reyes, corporate securities lawyer, Katten Muchin law firm, Chicago office
Partner

Mark J. Reyes concentrates his practice in corporate and securities matters, including representing issuers and investors in public offerings and private placements of equity and debt securities and advising clients in complex corporate transactions such as mergers, acquisitions, private investments in public equity (PIPEs), private equity investments and joint ventures. He also counsels public companies on securities law compliance, disclosures and corporate governance matters.

312-902-5612
Associate

Alyse Sagalchik concentrates her practice on corporate matters, with an emphasis on mergers and acquisitions, joint ventures, private equity and securities transactions. Alyse also advises companies on a broad range of general corporate, federal securities laws and corporate governance matters, including Securities Exchange Act of 1934 reporting and disclosure matters. She has represented strategic and financial buyers and sellers in M&A transactions ranging in value from $10 million to more than $15 billion and spanning a wide variety of industries, including health...

312.902.5426