Securities and Exchange Commission Approves New Rules for Reporting and Capital-Raising for Smaller Public Companies
REGISTRATION EXEMPTION FOR COMPENSATORY EMPLOYEE STOCK OPTIONS
The SEC approved a proposal for two new exemptions from the registration provisions of Section 12(g) of the Exchange Act for compensatory employee stock options.
The first exemption will apply to compensatory employee stock options issued under written compensatory stock options plans of a non-reporting issuer if:
1) Eligible option holders are limited to employees, directors, consultants, and advisors;
2) Transferability of shares received on exercise of the options and shares of the same class as those underlying the options is restricted; and
3) Risk and financial information is provided to option holders and holders of shares received on exercise of the options that is of the type that would be required under Rule 701 if securities sold in reliance on Rule 701 exceeded $5 million in a 12-month period.
The SEC will also adopt a second exemption for compensatory employee stock options of issuers that are subject to Exchange Act reporting. Option holders would have access to the issuer's publicly filed Exchange Act reports and Exchange Act Sections 14 and 16 would apply to the options and the securities issuable on exercise of those options.
FORM D FILINGS
The SEC proposals would mandate electronic filing of Form D as well as to refine and simplify the form. Currently, Form D filings may be made only on paper. The interactive, online filing system that the SEC intends to develop for Form D filings would be accessible from any computer with internet access.
The comment period on the proposed rules will be 60 days from the date of publication in the Federal Register.
The SEC's press release covering this action is available here. When it becomes available, the SEC's proposing release will be available here.
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