As described in our June 6, 2018, alert, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) required the SEC, within 60 days of enactment, to increase the threshold for providing additional disclosure. Our January 30, 2018, alert, provides an overview of Rule 701.

Under the amended Rule 701, if the aggregate sales price of securities sold by the issuer in reliance on Rule 701 exceeds $10 million in a 12-month period then, in addition to providing eligible recipients with a copy of the compensatory plan, the issuer must also provide additional disclosure to eligible recipients. The additional disclosure requirements continue to apply retroactively, and not just prospectively, to all of the sales made during the entire 12-month period (i.e., up to the full preceding 12 months). As noted in our prior alert, the Act also provides for automatic inflation adjustment of the aggregate sales price threshold every five years (rounded to the nearest $1 million). The amendment is immediately effective with respect to any issuer who has commenced an offering within the current 12-month period. 

On July 18, 2018, the SEC also published a concept release soliciting comment on various aspects of Rule 701 and Form S-8, the registration statement used in connection with compensatory securities offerings by public companies, signaling additional future rulemaking. We will continue to monitor and provide updates on the rulemaking process.