SEC Keeps Employee Stock Perks Paperwork-Light
Published Date: 6/30/2025
Notice
Summary
The SEC wants to keep Rule 701 going, which helps companies give stock or options to employees without lots of paperwork. About 3,700 companies use this rule, spending time and money to follow it, mostly on outside experts. The SEC is asking for your thoughts on how this rule works and its costs before they decide to extend it.
Analyzed Economic Effects
4 provisions identified: 2 benefits, 2 costs, 0 mixed.
Outsourced compliance cost burden
The SEC estimates 75% of the 2 hours per Rule 701 response (1.5 hours) is done by outside professionals at an estimated $600 per hour. That produces a total annual cost burden of $3,352,500 (1.5 hours × $600/hour × 3,725 responses).
Keeps Rule 701 exemption available
Rule 701 lets issuers that are not reporting companies give stock or options to employees and others without registering the offer and sale under the Securities Act. About 3,725 issuers rely on Rule 701 each year, and the rule requires issuers to give recipients certain investment information.
Issuer paperwork time burden
The SEC estimates each Rule 701 response takes about 2 hours, and that issuers prepare 25% of that time (0.5 hours per response). Across about 3,725 responses, the total annual issuer time burden is estimated at 1,863 hours (0.5 hours × 3,725 responses).
Required investor information disclosure
As a condition of relying on Rule 701, issuers must provide investors with certain information that the SEC says is important for investment decision making. This affects employees and other recipients of compensatory securities because recipients must receive that information before or with the offer.
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