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SEC modernizes rules on employee stock compensation

Jaclyn Jaeger | July 19, 2018

The Securities and Exchange Commission during its open meeting on Wednesday issued final rules that would raise the threshold for the enhanced disclosure requirement under Securities Act Rule 701, which allows companies to more easily pay their employees in stock. 

Under current federal securities laws, every offer and sale of securities must be registered or be subject to an exemption from registration. These requirements apply even when a company decides to issue stock to its own employees. 

“The Commission has long recognized that securities offerings done for compensatory purposes present different issues than securities offerings that raise capital,” William Hinman, director of the Division of Corporation Finance, said at the open meeting.

Rather than requiring a private company to register employee stock offerings, or requiring a public company to go through the traditional...

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