SEC Amends Rule 701 And Issues A Concept Release On Rule 701 And Form S-8 – Part I
On May 24, 2018, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”) into law. Section 507 of the Act directed the SEC to increase the threshold under Rule 701 of the Securities Act, for providing additional disclosures to employees from aggregate sales of $5,000,000 during any 12-month period to $10,000,000. In addition, the threshold is to be inflation-adjusted every five years. The Act required that the amendment be completed within 60 days and on July 18, 2018, the SEC complied and published the amendments. The amendments were effective immediately upon publication in the federal register.
On the same day, the SEC issued a concept release on potential further amendments to both Rule 701 and SEC Form S-8. The SEC is seeking public comment on ways to modernize the rules related to compensatory plans acknowledging the significant changes in both types of compensatory offerings and workforce composition in the past few decades.
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Regulation A For Publicly Reporting Companies, Economic Growth and Regulatory Relief
Regulation A+ will soon be available for publicly reporting companies. On May 24, 2018, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”) into law. Although the Act largely focuses on the banking industry and is being called the Dodd-Frank Rollback Act by many, it also contained much-needed provisions amending Regulation A+ and Rule 701 of the Securities Act.
The Act also amends Section 3(c)(1) of the Investment Company Act of 1940 to create a new category of pooled fund called a “qualifying venture capital fund,” which is a fund with less than $10,000,000 in aggregate capital contributions. A qualifying venture capital fund is exempt from the registration requirements under the 1940 Act as long as it has fewer than 250 investors. Section 3(c)(1) previously only exempted funds with fewer than 100 investors. The amendment is effective immediately and does not require rulemaking by the SEC, although I’m sure it will be followed by
