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NASPP Comment Letter on SEC Concept Release

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October 03, 2018 | Barbara Baksa

NASPP Comment Letter on SEC Concept Release

Earlier this summer, the SEC issued a concept release proposing various modernizations to Rule 701 and Form S-8 (see “Rule 701 and Form S-8 Developments,” July 23). With encouragement from the NASPP’s Executive Advisory Committee, the NASPP convened a small group of attorneys to help us evaluate the release and submit comments on it.  Here is a summary of our comments.

Form S-8

For the most part, we limited our comments to the changes proposed for Form S-8. We supported the following changes:

  • Allowing all plans to be registered on a single Form S-8. We feel this would give companies significantly more flexibility in managing the number of shares available under their Form S-8 registration and would allow unused shares in an old plan to be issued under a new plan (something that is currently difficult to do without paying to register the shares again under the new plan).  We did suggest that companies be allowed to file separate Forms S-8 for separate plans, if they desire.
  • Allowing additional shares to be registered via an immediately effective post-effective amendment to Form S-8. We think this would make it significantly easier for companies to register new share allocations.

The SEC asked about expanding the scope of Rule 701 to cover additional individuals, such as gig economy workers and whether Form S-8 should be similarly expanded. We did not comment on whether Rule 701 should be modified in this manner, but we noted that if it is, Form S-8 should be similarly expanded.

Rule 701 for Public Companies

The SEC also asked whether Rule 701 should be extended to public companies. We supported this but noted several concerns that would need to be addressed, including the resale restrictions applicable under Rule 701, state blue sky laws, and the disclosures necessary when issuances within a 12-month period exceed $10 million worth of stock.

Other Matters

Although the SEC did not expressly ask for comments on the following topics, we also requested that the SEC provide relief for situations in which public companies inadvertently issue shares in excess of their Form S-8 registration and for ESPPs implemented in conjunction with an IPO.

Read our full comment letter.

- Barbara

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