A 2018 law doubled Rule 701's disclosure trigger to $10 million

The record

Rule 701 exempts compensatory stock issuances by non-reporting companies from Securities Act registration; its paragraph (e), codified at 17 CFR 230.701(e), requires the issuer to deliver additional disclosures once the aggregate sales price or amount of securities sold in reliance on the rule during any consecutive 12-month period crosses a set dollar threshold. The Economic Growth, Regulatory Relief, and Consumer Protection Act, Pub. L. 115-174, signed 24 May 2018, directed the SEC in Section 507 to raise that threshold. The SEC's adopting release, Release No. 33-10520, increased the figure "from $5 million to $10 million," effective 23 July 2018.

What the documents establish

The statute itself did not set a new number; it instructed the Commission to act, and the release is the SEC's own account of what changed. The release states the amendment left Rule 701(e) "otherwise continue to operate in the same manner as it currently does," meaning the disclosures required above the threshold were not altered, only the dollar line that triggers them. The current rule text confirms the $10 million figure remains in force and spells out what must be delivered above it: a summary plan description if the plan is subject to ERISA, or a summary of the plan's material terms if it is not; information about investment risk; and financial statements meeting Regulation A's Form 1-A Part F/S standard, dated no more than 180 days before the sale. The release also notes issuers that had already commenced a 12-month offering period could apply the new threshold immediately upon the amendment's effectiveness.

The operating read

Rule 701 is a registration exemption, not a blanket exemption from every disclosure obligation a compensatory arrangement might trigger; a company relying on it must still separately consider state securities law, ERISA where applicable, and its own contractual disclosure commitments. This is an editorial point: because the trigger is an aggregate 12-month rolling figure across all Rule 701 issuances, not a per-grant or per-employee number, a private company running an active equity compensation plan should track cumulative sales price across every option exercise and RSU settlement in the same 12-month window, not just new grants, to know when the $10 million line is crossed.

What to check before you decide

Before assuming a compensatory issuance is exempt from Rule 701(e)'s extra disclosures, check:

• What is the aggregate sales price or amount of securities sold under Rule 701 across the trailing 12 months, not just the current grant?
• Is the compensatory plan subject to ERISA, which determines whether a summary plan description or a general summary of terms is required?
• Are the financial statements to be delivered dated within 180 days of the sale, as the rule requires once the threshold is crossed?

Nothing here substitutes for counsel's review of a specific plan; it summarizes what the statute directed and what the Commission's own release and current rule text state resulted.