Exempt Offerings Pursuant to Compensatory Arrangements, 34940-34944 [2018-15730]
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Federal Register / Vol. 83, No. 142 / Tuesday, July 24, 2018 / Rules and Regulations
Committee deliberations on all issues.
Like all Committee meetings, the
October 25, 2017, meeting was a public
meeting, and all entities, both large and
small, were able to express views on
this issue.
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
chapter 35), the Order’s information
collection requirements have been
previously approved by OMB and
assigned OMB No. 0581–0178, Specialty
Crops Program. No changes are
necessary in those requirements as a
result of this action. Should any changes
become necessary, they would be
submitted to OMB for approval.
This rule establishes salable
quantities and allotment percentages for
Class 1 (Scotch) spearmint oil and Class
3 (Native) spearmint oil produced in the
Far West during the 2018–2019
marketing year. Accordingly, this rule
imposes no additional reporting or
recordkeeping requirements on either
small or large Far West spearmint oil
producers or handlers. As with all
Federal marketing order programs,
reports and forms are periodically
reviewed to reduce information
requirements and duplication by
industry and public-sector agencies. As
mentioned in the initial regulatory
flexibility analysis, USDA has not
identified any relevant Federal rules
that duplicate, overlap, or conflict with
this final rule.
AMS is committed to complying with
the E-Government Act, to promote the
use of the internet and other
information technologies to provide
increased opportunities for citizen
access to Government information and
services, and for other purposes.
A proposed rule concerning this
action was published in the Federal
Register on April 6, 2018 (83 FR 14766).
Copies of the proposed rule were also
mailed or sent via facsimile to all Far
West spearmint oil handlers. Finally,
the proposal was made available
through the internet by USDA and the
Office of the Federal Register. A 60-day
comment period ending June 5, 2018,
was provided for interested persons to
respond to the proposal. No comments
were received.
A small business guide on complying
with fruit, vegetable, and specialty crop
marketing agreements and orders may
be viewed at: https://www.ams.usda.gov/
rules-regulations/moa/small-businesses.
Any questions about the compliance
guide should be sent to Richard Lower
at the previously mentioned address in
the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant
material presented, including the
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information and recommendation
submitted by the Committee and other
available information, it is hereby found
that this rule, will tend to effectuate the
declared policy of the Act.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats,
Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the
preamble, 7 CFR part 985 is amended as
follows:
PART 985—MARKETING ORDER
REGULATING THE HANDLING OF
SPEARMINT OIL PRODUCED IN THE
FAR WEST
1. The authority citation for 7 CFR
part 985 continues to read as follows:
■
Authority: 7 U.S.C. 601–674.
■
2. Revise § 985.233 to read as follows:
§ 985.233 Salable quantities and allotment
percentages.
The salable quantity and allotment
percentage for each class of spearmint
oil during the marketing year beginning
on June 1, 2018, shall be as follows:
(a) Class 1 (Scotch) oil—a salable
quantity of 760,660 pounds and an
allotment percentage of 35 percent.
(b) Class 3 (Native) oil—a salable
quantity of 1,307,947 pounds and an
allotment percentage of 53 percent.
§§ 985.234 and 985.235
■
[Removed]
3. Remove §§ 985.234 and 985.235.
Dated: July 19, 2018.
Bruce Summers,
Administrator, Agricultural Marketing
Service.
[FR Doc. 2018–15788 Filed 7–23–18; 8:45 am]
BILLING CODE 3410–02–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 230
[Release No. 33–10520; File No. S7–17–18]
RIN 3235–AM39
Exempt Offerings Pursuant to
Compensatory Arrangements
Securities and Exchange
Commission.
ACTION: Final rule.
AGENCY:
The Securities and Exchange
Commission is adopting an amendment
to its regulations under the Securities
Act of 1933 (the ‘‘Securities Act’’),
which provide an exemption from
registration for securities issued by non-
SUMMARY:
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reporting companies pursuant to
compensatory arrangements. As
mandated by the Economic Growth,
Regulatory Relief, and Consumer
Protection Act (the ‘‘Act’’), the
amendment revises a rule to increase
from $5 million to $10 million the
aggregate sales price or amount of
securities sold during any consecutive
12-month period in excess of which the
issuer is required to deliver additional
disclosures to investors.
DATES:
Effective date: July 23, 2018.
Comment date: Comments regarding
the collection of information
requirements within the meaning of the
Paperwork Reduction Act of 1995
should be received on or before August
23, 2018.
ADDRESSES: Comments may be
submitted by any of the following
methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/final.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number S7–
xx–18 on the subject line; or
• Use the Federal eRulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File
Number S7–17–18. This file number
should be included on the subject line
if email is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s internet website
(https://www.sec.gov/rules/final.shtml).
Comments are also available for website
viewing and printing in the
Commission’s Public Reference Room,
100 F Street NE, Washington, DC 20549,
on official business days between the
hours of 10:00 a.m. and 3:00 p.m. All
comments received will be posted
without change; we do not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
FOR FURTHER INFORMATION CONTACT:
Anne M. Krauskopf, Senior Special
Counsel, and Adam F. Turk, Special
Counsel, Office of Chief Counsel,
Division of Corporation Finance, at
(202) 551–3500.
SUPPLEMENTARY INFORMATION: We are
adopting an amendment to 17 CFR
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Federal Register / Vol. 83, No. 142 / Tuesday, July 24, 2018 / Rules and Regulations
230.701 (Rule 701) 1 under the
Securities Act.2
I. Background
Rule 701 provides an exemption from
the registration requirements of the
Securities Act for offers and sales of
securities under certain compensatory
benefit plans or written agreements
relating to compensation. The
exemption covers securities offered or
sold under a plan or agreement between
a non-reporting company 3 and the
company’s employees, officers,
directors, partners, trustees, consultants,
and advisors.4
jstallworth on DSKBBY8HB2PROD with RULES
II. Rule Amendment
As mandated by Section 507 of the
Act,5 we are amending Rule 701(e) 6 to
increase from $5 million to $10 million 7
the aggregate sales price or amount of
securities sold during any consecutive
12-month period in excess of which the
issuer is required to deliver additional
disclosure to investors. As amended,
Rule 701(e) will otherwise continue to
operate in the same manner as it
currently does.8 Specifically, the
additional disclosures required by Rule
701(e) 9 will not be required for sales up
to $10 million in the 12-month period.
If aggregate sales during that period
exceed $10 million, however, the issuer
1 Unless otherwise noted, all references to
statutory sections are to the Securities Act, and all
references to rules under the Securities Act are to
title 17, part 230 of the Code of Federal Regulations
[17 CFR part 230].
2 15 U.S.C. 77a et seq.
3 Only issuers that are not subject to the reporting
requirements of Section 13 [15 U.S.C. 78m] or 15(d)
[15 U.S.C. 78o(d)] of the Securities Exchange Act of
1934 (‘‘Exchange Act’’) and are not investment
companies registered or required to be registered
under the Investment Company Act of 1940 [15
U.S.C. 80a–1 et seq.] are eligible to rely on Rule 701.
4 The rule applies to compensatory arrangements
established by the issuer, its parents, its majorityowned subsidiaries and majority-owned
subsidiaries of the issuer’s parent.
5 Public Law 115–174, 132 Stat. 1296 (2018).
6 17 CFR 230.701(e).
7 Section 507 of the Act also requires that every
five years we index for inflation such aggregate
sales price or amount of securities sold to reflect the
change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor
Statistics, rounding to the nearest $1 million.
8 Concurrent with the adoption of this
amendment to Rule 701, we are issuing a concept
release requesting public comment on various other
issues relating to Rule 701. See Release No. 33–
10521 (Jul. 18, 2018).
9 These disclosures consist of:
• A copy of the summary plan description
required by the Employee Retirement Income
Security Act of 1974 (‘‘ERISA’’) [29 U.S.C. 1104–
1107] or, if the plan is not subject to ERISA, a
summary of the plan’s material terms;
• risk factors associated with investment in the
securities under the plan or agreement; and
• the financial statements required in an offering
statement on Form 1–A [17 CFR 239.90] under
Regulation A [17 CFR 230.251 through 230.263].
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must deliver those additional
disclosures a reasonable period of time
before the date of sale to all investors in
the 12-month period. Issuers that have
commenced an offering in the current
12-month period will be able to apply
the new $10 million disclosure
threshold immediately upon
effectiveness of the amendment.
III. Procedural Matters
The Administrative Procedure Act
(‘‘APA’’) generally requires an agency to
publish notice of a proposed rulemaking
in the Federal Register and provide an
opportunity for public comment.10 This
requirement does not apply, however, if
the agency ‘‘for good cause finds . . .
that notice and public procedure are
impracticable, unnecessary, or contrary
to the public interest.’’ 11 As discussed
above, Section 507 of the Act directs the
Commission, not later than 60 days after
the date of enactment, to amend Rule
701(e) to increase from $5 million to $10
million the aggregate sales price or
amount of securities sold during any
consecutive 12-month period in excess
of which the issuer is required to deliver
additional disclosures to investors.
Because the amendment is necessary to
conform Rule 701(e) to the requirements
of the Act, and involves no exercise of
agency discretion, we find that notice
and public comment are unnecessary.12
The APA also generally requires that an
agency publish an adopted rule in the
Federal Register 30 days before it
becomes effective.13 This requirement,
however, does not apply if the agency
finds good cause for making the rule
effective sooner.14 For the same reasons
as we are forgoing notice and comment,
we find good cause to make the rules
effective immediately upon publication
in the Federal Register. In addition, we
find that the amendment relieves a
restriction in our rules.15
IV. Economic Analysis
We are mindful of the costs imposed
by and the benefits obtained from our
10 See
5 U.S.C. 553(b).
11 Id.
12 This finding also satisfies the requirements of
5 U.S.C. 808(2), allowing the amendment to become
effective notwithstanding the requirement of 5
U.S.C. 801 (if a federal agency finds that notice and
public comment are impractical, unnecessary, or
contrary to the public interest, a rule shall take
effect at such time as the federal agency
promulgating the rule determines). The amendment
also does not require analysis under the Regulatory
Flexibility Act. See 5 U.S.C. 604(a) (requiring a final
regulatory flexibility analysis only for rules
required by the APA or other law to undergo notice
and comment).
13 See 5 U.S.C. 553(d).
14 Id.
15 Id.
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34941
rules and amendments.16 The
discussion below addresses the
potential economic effects of the
amendment, including the likely
benefits and costs. The Commission is
adopting an amendment to implement
the specific statutory mandate of
Section 507 of the Act. The legislative
history suggests that Section 507 of the
Act was intended to address two
concerns with the existing $5 million
threshold for requiring additional
disclosure. Namely, that the additional
disclosure makes it more expensive for
companies to compensate their
employees with the company’s stock
and that this disclosure puts nonreporting companies at risk of disclosing
confidential financial information.17 By
increasing the threshold from $5 million
to $10 million, we believe that Congress
intended to alleviate some of these
concerns. The costs and benefits of this
amendment stem entirely from the
statutory mandate of Section 507.18 In
addition, given that the amendment
implements a statutory mandate and
involves no exercise of agency
discretion, we believe there are no
reasonable alternatives to the
amendment.19
A. Baseline
The baseline for our economic
analysis is the disclosure requirement of
Item 701(e) prior to the amendment
being adopted, which required an issuer
to deliver additional disclosures to
investors if the aggregate sales price or
amount of securities sold during any
consecutive 12-month period exceeded
$5 million. The amendment will affect
non-reporting companies that rely on
Rule 701 to offer securities to plan
16 Section 2(b) of the Securities Act [15 U.S.C.
77b(b)] requires the Commission, when engaging in
rulemaking where it is required to consider or
determine whether an action is necessary or
appropriate in the public interest, to consider, in
addition to the protection of investors, whether the
action will promote efficiency, competition and
capital formation.
17 See, e.g., Report of the Financial Services
Committee of the House of Representatives to H.R.
1343 (‘‘These exemptions assist privately-held
companies that want to provide their employees
with the option to purchase the company’s
securities to increase employee ownership. . . .
Rule 701 should be updated by raising the $5
million threshold requirement because the
disclosures make it more expensive for companies
to compensate their employees with the company’s
stock. In addition, these disclosure requirements
put private companies at risk of disclosing
confidential financial information.’’).
18 As the intent of this rulemaking is to
implement the specific regulatory change mandated
by Congress, this analysis focuses on the economic
effects arising from that change.
19 As noted above, concurrent with the adoption
of this amendment, we are issuing a concept release
requesting public comment on various other issues
relating to Rule 701.
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Federal Register / Vol. 83, No. 142 / Tuesday, July 24, 2018 / Rules and Regulations
participants pursuant to compensatory
benefit plans. In particular, the
amendment will affect non-reporting
companies that issue, or seek to issue,
between $5 million and $10 million in
a 12-month period. Non-reporting
companies that issue less than $5
million or more than $10 million in a
12-month period will not be affected by
the amendment. The Commission lacks
data on non-reporting companies that
rely on, or seek to rely on, Rule 701 to
offer securities pursuant to
compensatory benefit plans. We can
approximate the number of growth
companies with external financing
needs using data on companies
conducting exempt securities offerings
under Regulation D, Regulation A, and
Regulation Crowdfunding. This group
may be likely to rely on Rule 701 for the
purpose of offering competitive
compensation packages to attract and
retain key individuals. Based on filings
in 2017, we estimate there are
approximately 16,491 non-reporting
companies conducting exempt offerings
of unregistered securities under the
aforementioned exemptions.20 Some of
these companies may currently be too
small to offer securities in compensatory
benefit plans that would fall in the $5
million to $10 million range over a 12month period, but could potentially be
able to do so in the future if they
successfully grow their businesses. We
do not have access to equivalent data for
non-reporting foreign private issuers,
who also can rely on Rule 701 to offer
securities pursuant to compensatory
benefit plans.
Plan participants who make use of
issuer disclosures will also be affected
by the amendment mandated by the Act.
To the extent a company issues more
than $5 million but less than $10
million in aggregate sales price of
securities under the rule in a 12-month
period, the company will not be
required to deliver the Rule 701(e)
disclosures to plan participants.
jstallworth on DSKBBY8HB2PROD with RULES
B. Economic Effects of the Amendment
The statutory mandate requires the
Commission to raise the threshold for
requiring issuers to deliver additional
disclosure to plan participants in Rule
20 Based on staff analysis of EDGAR filings in
calendar year 2017, there were approximately
15,960 non-reporting operating companies
conducting Regulation D offerings. In addition,
there were 88 newly qualified offerings under
Regulation A during calendar year 2017, excluding
post-qualification amendments and withdrawn
offerings. Finally, 443 non-reporting companies
conducted offerings solely under Regulation
Crowdfunding in 2017 (companies conducting both
Regulation D and Regulation Crowdfunding
offerings in 2017 are included in the number for
Regulation D offerings).
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701 offerings from $5 million to $10
million in any consecutive 12-month
period. This will lower the regulatory
burden in terms of required disclosures
and thereby reduce the cost of securities
offerings in this range pursuant to
compensatory benefit plans by affected
non-reporting companies. In addition, if
the regulatory burden under the
baseline currently deters some nonreporting companies from using this
form of compensation arrangement to an
extent that otherwise would be desired,
such companies may be able to improve
the efficiency of their employee
compensation plans or contracts under
the amendment and thereby improve
company performance (e.g., through
improved incentive provisions). Such
increases in efficiency may permit these
companies to deploy resources more
productively. Further, these efficiency
gains may be passed through to some
plan participants through increases in
the value of securities offered by nonreporting companies as these companies
are able to avail themselves of the Rule
701 exemption without having to
provide the previously required
disclosure.
The amendment may reduce the
amount of information available to plan
participants, as issuers conducting
offerings in the $5 million to $10
million range will not be required to
provide Rule 701(e) disclosures to
investors a reasonable period of time
before the date of sale. Less information
to plan participants may in turn make
it harder for them to accurately value
the offerings, and may partially offset
the efficiency gains noted above. To the
extent non-reporting issuers have issued
securities in reliance on Regulation A
and made available the information
required by Rule 701(e) or have issued
securities in excess of $5 million in
reliance on Rule 701 in the current 12month period, and, at their option,
continue to provide the disclosures
required by Rule 701(e), there may be no
loss of information to participants.21
We expect the amendment to make
compliance burdens the same between
companies seeking to use Rule 701 to
offer amounts up to $5 million and
companies seeking to use Rule 701 to
offer amounts between $5 million and
$10 million. By doubling the amount of
securities that can be offered to
21 Based on a review of Regulation A offering
statements, irrespective of the offering amount
sought, the staff identified approximately seven
cases of companies that disclosed unregistered
securities sold in reliance upon Rule 701 in the past
twelve months in Part I of Form 1–A; however, this
would not account for companies that have
conducted a Regulation A offering and
subsequently have relied upon Rule 701 for
unregistered sales.
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employees without requiring the
additional disclosure under Rule 701(e)
from $5 million to $10 million, the
amendment to Rule 701 may have
competitive effects for non-reporting
companies that offer or sell securities as
compensation. Although the
Commission does not anticipate that the
amendment will have substantial
competitive effects among firms that
currently rely on Rule 701, the
amendment may permit some smaller
companies to compete with larger
companies to recruit and retain
employees by increasing the offering
amount threshold for additional
disclosure from $5 million to $10
million.
Relatedly, companies seeking to offer
amounts between $5 million and $10
million will experience a reduction in
regulatory burden compared to
companies wishing to offer amounts
over $10 million. As discussed below in
Section V.A, for the purposes of the
Paperwork Reduction Act, the
Commission estimates that
approximately 10% of the 16,149 nonreporting companies, or 1,600 issuers,
provide information under Rule 701,
and that approximately one-half of those
issuers (800) will sell securities in
compensatory benefit plans between $5
million to $10 million over a 12-month
period. Using these estimates, we
further estimate that the amendment
will reduce the regulatory burden
associated with Rule 701 by 400 hours
of company personnel time and
$480,000 in professional costs per year.
Finally, to the extent compensatory
benefit plans are used by non-reporting
companies to attract and retain persons
that are in demand internationally, a
reduction in regulatory burden due to
the amendment of Rule 701(e) may also
increase the international
competiveness of the companies
affected by the amendment.
V. Paperwork Reduction Act
A. Background and Summary
Certain provisions of Rule 701 that
will be affected by the amendment
contain ‘‘collection of information’’
requirements within the meaning of the
Paperwork Reduction Act of 1995
(‘‘PRA’’).22 The Commission is
submitting the amendment to the Office
of Management and Budget (‘‘OMB’’) for
review in accordance with the PRA.23
The title for the affected collection of
information is:
Rule 701 (OMB Control No. 3235–
0522).
22 44
23 44
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U.S.C. 3501 et seq.
U.S.C. 3507(d) and 5 CFR 1320.11.
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Federal Register / Vol. 83, No. 142 / Tuesday, July 24, 2018 / Rules and Regulations
retention period for the information
disclosed.
We estimate that currently
approximately 1,600 issuers 24 provide
information under Rule 701, and that
the estimated number of burden hours
per respondent is two.25 Therefore, we
estimate an aggregate of 3,200 burden
hours per year. The portion of the
burden carried by outside professionals
is reflected as a cost, while the portion
of the burden carried by the issuer
internally is reflected in hours. We
estimate that 25% of the burden per
response is completed by the issuer
internally and the other 75% of burden
per response is attributed to outside
cost, using $400 as the professional cost
per burden hour.26 We believe the
amendment will reduce the current
burden estimates associated with Rule
Rule 701 provides an exemption from
registration for offers and sales of
securities pursuant to certain
compensatory benefit plans and
contracts relating to compensation.
Issuers conducting employee benefit
plan offerings in excess of $5 million in
reliance on Rule 701 are required to
provide plan participants with certain
disclosures, including financial
statement disclosures. This disclosure
constitutes a collection of information.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information
requirement unless it displays a
currently valid OMB control number.
Compliance with the information
collection is mandatory. Responses to
the information collection are not kept
confidential and there is no mandatory
701 for issuers that sell securities in
compensatory benefit plans in the $5
million to $10 million range over a 12month period, especially for issuers that
do not otherwise prepare the same types
of disclosure in their normal course of
business. We estimate this will impact
one-half of the issuers that currently
provide information under Rule 701, or
800 issuers.
We therefore estimate the total annual
decrease in the paperwork burden for all
affected companies to comply with the
collection of information requirements
of Rule 701, as amended, will be
approximately 1,600 hours, allocated as
a decrease of 400 hours (800 issuers ×
0.5 burden hour) of company personnel
time and a decrease of $480,000 of
professional costs (800 issuers × 1.5
hours × $400 per hour).
TABLE 1—DECREASE IN PAPERWORK BURDEN UNDER THE FINAL AMENDMENT
Estimated
number of
affected
responses
Decrease in
burden hours
per response
Total decrease
in burden
hours
25%
Company
75%
Professional
Professional
costs
(A)
(B)
(C) = (A) * (B)
(E) = (C) *
0.25
(E) = (C) *
0.75
(F) = (E) *
$400
Rule 701(e) disclosure .............................
800
2
(1,600)
(400)
(1,200)
($480,000)
B. Request for Comment
comments on the collection of
information requirements should direct
their comments to the Office of
Management and Budget, Attention:
Desk Officer for the Securities and
Exchange Commission, Office of
Information and Regulatory Affairs,
Washington, DC 20503, and send a copy
of the comments to Brent J. Fields,
Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090, with
reference to File No. S7–17–18.
Requests for materials submitted to the
OMB by us with regard to these
collections of information should be in
writing, refer to File No. S7–17–18 and
be submitted to the Securities and
Exchange Commission, Office of FOIA
Services, 100 F Street NE, Washington,
DC 20549–0213. Interested persons are
encouraged to send comments to the
OMB by August 23, 2018.
jstallworth on DSKBBY8HB2PROD with RULES
We request comments in order to
evaluate: (1) Whether the collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information would have practical
utility; (2) the accuracy of our estimate
of the burden of the collection of
information; (3) whether there are ways
to enhance the quality, utility and
clarity of the information to be
collected; and (4) whether there are
ways to minimize the burden of the
collection of information on those who
are to respond, including through the
use of automated collection techniques
or other forms of information
technology.
Any member of the public may direct
to us any comments concerning the
accuracy of these burden estimates and
any suggestions for reducing the
burdens. Persons who desire to submit
24 See Section IV.A, above. While we estimate
that there are 16,491 non-reporting companies
conducting exempt offerings of unregistered
securities under Regulation A, Regulation
Crowdfunding and Regulation D, some of these
issuers may currently be too small to offer securities
in compensatory benefit plans in excess of $5
million over a 12-month period. For purposes of
this PRA analysis, we estimate that approximately
10% of those issuers currently provide information
under Rule 701.
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25 Issuers are required to provide information that
is similar to, but not as extensive as, the
information required by Form 1–SA [17 CFR
239.90], the semiannual report required to be filed
with the Commission under Regulation A [17 CFR
230.251 through 230.263]. We believe, however,
that many of these issuers already prepare the same
types of disclosure in their normal course of
business, such as for using other exemptions, so we
estimate that the burden is two hours.
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VI. Statutory Authority
The amendment contained in this
release is adopted under the authority
set forth in sections 3(b), 19(a), and 28
of the Securities Act and section 507 of
the Economic Growth, Regulatory
Relief, and Consumer Protection Act.
List of Subjects in 17 CFR Part 230
Reporting and recordkeeping
requirements, Securities.
Text of Amendment
For the reasons set out in the
preamble, title 17 chapter II of the Code
of Federal Regulations is amended as
follows:
PART 230—GENERAL RULES AND
REGULATIONS, SECURITIES ACT OF
1933
1. The authority citation for part 230
continues to read in part as follows:
■
26 We recognize that the costs of retaining outside
professionals may vary depending on the nature of
the professional services, but for purposes of this
PRA analysis we estimate that such costs will be an
average of $400 per hour. This estimate is based on
consultations with several registrants, law firms and
other persons who regularly assist registrants in
preparing and filing periodic reports with the
Commission.
E:\FR\FM\24JYR1.SGM
24JYR1
34944
Federal Register / Vol. 83, No. 142 / Tuesday, July 24, 2018 / Rules and Regulations
Authority: 15 U.S.C. 77b, 77b note, 77c,
77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss,
78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note,
78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a–
28, 80a–29, 80a–30, and 80a–37, and Pub. L.
112–106, sec. 201(a), sec. 401, 126 Stat. 313
(2012), and Pub. L. 115–174, sec. 507, 132
Stat. 1296 (2018), unless otherwise noted.
*
*
*
*
*
2. Section 230.701 is amended by
revising the introductory text of
paragraph (e) to read as follows:
■
§ 230.701 Exemption for offers and sales
of securities pursuant to certain
compensatory benefit plans and contracts
relating to compensation.
*
*
*
*
*
(e) Disclosure that must be provided.
The issuer must deliver to investors a
copy of the compensatory benefit plan
or the contract, as applicable. In
addition, if the aggregate sales price or
amount of securities sold during any
consecutive 12-month period exceeds
$10 million, the issuer must deliver the
following disclosure to investors a
reasonable period of time before the
date of sale:
*
*
*
*
*
By the Commission.
Dated: July 18, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018–15730 Filed 7–23–18; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[Docket Number USCG–2018–0698]
RIN 1625–AA08
Safety Zones; Pipeline Construction,
Tennessee River Miles 465 to 466,
Chattanooga, TN
Coast Guard, DHS.
Temporary final rule.
AGENCY:
ACTION:
The Coast Guard is
establishing a temporary safety zone for
all navigable waters of the Tennessee
River from mile marker 465 to mile
marker 466. This safety zone is
necessary to protect persons, property,
and the marine environment from
potential hazards associated with the
construction of an underground
pipeline. Entry of vessels or persons
into this zone is prohibited unless
authorized by the Captain of the Port
Sector Ohio Valley or a designated
representative.
jstallworth on DSKBBY8HB2PROD with RULES
SUMMARY:
VerDate Sep<11>2014
13:57 Jul 23, 2018
Jkt 244001
This rule is effective from 7:30
a.m. on July 24, 2018, through 7 p.m. on
August 24, 2018. This rule will be
enforced from 7:30 a.m. through 7 p.m.
each day during the effective period,
excluding Saturdays and Sundays.
ADDRESSES: To view documents
mentioned in this preamble as being
available in the docket, go to https://
www.regulations.gov, type USCG–2018–
0698 in the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on Open Docket
Folder on the line associated with this
rule.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
email Petty Officer Nicholas Jones,
Marine Safety Detachment Nashville,
U.S. Coast Guard; telephone 615–736–
5421, email MSDNashville@uscg.mil.
SUPPLEMENTARY INFORMATION:
DATES:
I. Table of Abbreviations
CFR Code of Federal Regulations
COTP Captain of the Port Sector Ohio
Valley
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of proposed rulemaking
§ Section
U.S.C. United States Code
II. Background Information and
Regulatory History
On July 10, 2018, Reynolds
Construction, L.L.C notified Marine
Safety Detachment Nashville that their
underwater pipeline construction
operations at mile marker 465.2 of the
Tennessee River would be ready to
commence on July 24, 2018. Reynolds
Construction estimates that the work
will take 20 days, excluding weekends
and holidays, and will conclude no later
than August 24, 2018.
The Coast Guard is issuing this
temporary rule without prior notice and
opportunity to comment pursuant to
authority under section 4(a) of the
Administrative Procedure Act (5 U.S.C.
553(b)). This provision authorizes an
agency to issue a rule without prior
notice and opportunity to comment
when the agency for good cause finds
that those procedures are
‘‘impracticable, unnecessary, or contrary
to the public interest.’’ Under 5 U.S.C.
553(b)(3)(B), the Coast Guard finds that
good cause exists for not publishing a
notice of proposed rulemaking (NPRM)
with respect to this rule because it is
impracticable. We must establish this
safety zone by July 24, 2018, and lack
sufficient time to provide a reasonable
comment period and then consider
those comments before issuing the rule.
Under 5 U.S.C. 553(d)(3), the Coast
Guard finds that good cause exists for
making it effective less than 30 days
PO 00000
Frm 00012
Fmt 4700
Sfmt 4700
after publication in the Federal
Register. Delaying the effective date of
this rule would be contrary to public
interest because immediate action is
needed to respond to potential safety
hazards associated with the underwater
pipeline construction.
III. Legal Authority and Need for Rule
The Coast Guard is issuing this rule
under authority in 33 U.S.C. 1231. The
Captain of the Port Sector Ohio Valley
(COTP) has determined that potential
hazards associated with the underwater
blasting and pipeline construction will
be a safety concern for anyone on a onemile stretch of the Tennessee River.
This rule is necessary to protect
persons, vessels, and the marine
environment during the construction
operations.
IV. Discussion of the Rule
This rule establishes a temporary
safety zone from 7:30 a.m. on July 24,
2018 through 7 p.m. on August 24, 2018
from mile marker 465 to mile marker
466 on the Tennessee River in
Chattanooga, TN. The safety zone will
be enforced from 7:30 a.m. through 7
p.m. each day, excluding Saturdays and
Sundays. A safety vessel will coordinate
all vessel traffic during the enforcement
periods. The COTP may terminate
enforcement of this rule if the work is
finished earlier. The duration of the
safety zone is intended to protect
persons, vessels, and the marine
environment during the construction
operations.
No vessel or person is permitted to
enter the safety zone without obtaining
permission from the COTP or a
designated representative. A designated
representative is a commissioned,
warrant, or petty officer of the U.S.
Coast Guard assigned to units under the
operational control of Sector Ohio
Valley, U.S. Coast Guard. They may be
contacted on VHF Channel 13 or 16, or
at 1–800–253–7465. All persons and
vessels permitted to enter this safety
zone must transit at their slowest safe
speed and comply with all directions
issued by the COTP or the designated
representative. The COTP or a
designated representative will inform
the public of the enforcement times and
dates for this safety zone through
Broadcast Notices to Mariners (BNMs),
Local Notices to Mariners (LNMs), and/
or Marine Safety Information Bulletins
(MSIBs), as appropriate.
V. Regulatory Analyses
We developed this rule after
considering numerous statutes and
Executive orders related to rulemaking.
Below we summarize our analyses
E:\FR\FM\24JYR1.SGM
24JYR1
]]>Agencies
[Federal Register Volume 83, Number 142 (Tuesday, July 24, 2018)]
[Rules and Regulations]
[Pages 34940-34944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15730]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 230
[Release No. 33-10520; File No. S7-17-18]
RIN 3235-AM39
Exempt Offerings Pursuant to Compensatory Arrangements
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Securities and Exchange Commission is adopting an
amendment to its regulations under the Securities Act of 1933 (the
``Securities Act''), which provide an exemption from registration for
securities issued by non-reporting companies pursuant to compensatory
arrangements. As mandated by the Economic Growth, Regulatory Relief,
and Consumer Protection Act (the ``Act''), the amendment revises a rule
to increase from $5 million to $10 million the aggregate sales price or
amount of securities sold during any consecutive 12-month period in
excess of which the issuer is required to deliver additional
disclosures to investors.
DATES:
Effective date: July 23, 2018.
Comment date: Comments regarding the collection of information
requirements within the meaning of the Paperwork Reduction Act of 1995
should be received on or before August 23, 2018.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/final.shtml); or
Send an email to [email protected]. Please include
File Number S7-xx-18 on the subject line; or
Use the Federal eRulemaking Portal (https://www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number S7-17-18. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
internet website (https://www.sec.gov/rules/final.shtml). Comments are
also available for website viewing and printing in the Commission's
Public Reference Room, 100 F Street NE, Washington, DC 20549, on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
All comments received will be posted without change; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: Anne M. Krauskopf, Senior Special
Counsel, and Adam F. Turk, Special Counsel, Office of Chief Counsel,
Division of Corporation Finance, at (202) 551-3500.
SUPPLEMENTARY INFORMATION: We are adopting an amendment to 17 CFR
[[Page 34941]]
230.701 (Rule 701) \1\ under the Securities Act.\2\
---------------------------------------------------------------------------
\1\ Unless otherwise noted, all references to statutory sections
are to the Securities Act, and all references to rules under the
Securities Act are to title 17, part 230 of the Code of Federal
Regulations [17 CFR part 230].
\2\ 15 U.S.C. 77a et seq.
---------------------------------------------------------------------------
I. Background
Rule 701 provides an exemption from the registration requirements
of the Securities Act for offers and sales of securities under certain
compensatory benefit plans or written agreements relating to
compensation. The exemption covers securities offered or sold under a
plan or agreement between a non-reporting company \3\ and the company's
employees, officers, directors, partners, trustees, consultants, and
advisors.\4\
---------------------------------------------------------------------------
\3\ Only issuers that are not subject to the reporting
requirements of Section 13 [15 U.S.C. 78m] or 15(d) [15 U.S.C.
78o(d)] of the Securities Exchange Act of 1934 (``Exchange Act'')
and are not investment companies registered or required to be
registered under the Investment Company Act of 1940 [15 U.S.C. 80a-1
et seq.] are eligible to rely on Rule 701.
\4\ The rule applies to compensatory arrangements established by
the issuer, its parents, its majority-owned subsidiaries and
majority-owned subsidiaries of the issuer's parent.
---------------------------------------------------------------------------
II. Rule Amendment
As mandated by Section 507 of the Act,\5\ we are amending Rule
701(e) \6\ to increase from $5 million to $10 million \7\ the aggregate
sales price or amount of securities sold during any consecutive 12-
month period in excess of which the issuer is required to deliver
additional disclosure to investors. As amended, Rule 701(e) will
otherwise continue to operate in the same manner as it currently
does.\8\ Specifically, the additional disclosures required by Rule
701(e) \9\ will not be required for sales up to $10 million in the 12-
month period. If aggregate sales during that period exceed $10 million,
however, the issuer must deliver those additional disclosures a
reasonable period of time before the date of sale to all investors in
the 12-month period. Issuers that have commenced an offering in the
current 12-month period will be able to apply the new $10 million
disclosure threshold immediately upon effectiveness of the amendment.
---------------------------------------------------------------------------
\5\ Public Law 115-174, 132 Stat. 1296 (2018).
\6\ 17 CFR 230.701(e).
\7\ Section 507 of the Act also requires that every five years
we index for inflation such aggregate sales price or amount of
securities sold to reflect the change in the Consumer Price Index
for All Urban Consumers published by the Bureau of Labor Statistics,
rounding to the nearest $1 million.
\8\ Concurrent with the adoption of this amendment to Rule 701,
we are issuing a concept release requesting public comment on
various other issues relating to Rule 701. See Release No. 33-10521
(Jul. 18, 2018).
\9\ These disclosures consist of:
A copy of the summary plan description required by the
Employee Retirement Income Security Act of 1974 (``ERISA'') [29
U.S.C. 1104-1107] or, if the plan is not subject to ERISA, a summary
of the plan's material terms;
risk factors associated with investment in the
securities under the plan or agreement; and
the financial statements required in an offering
statement on Form 1-A [17 CFR 239.90] under Regulation A [17 CFR
230.251 through 230.263].
---------------------------------------------------------------------------
III. Procedural Matters
The Administrative Procedure Act (``APA'') generally requires an
agency to publish notice of a proposed rulemaking in the Federal
Register and provide an opportunity for public comment.\10\ This
requirement does not apply, however, if the agency ``for good cause
finds . . . that notice and public procedure are impracticable,
unnecessary, or contrary to the public interest.'' \11\ As discussed
above, Section 507 of the Act directs the Commission, not later than 60
days after the date of enactment, to amend Rule 701(e) to increase from
$5 million to $10 million the aggregate sales price or amount of
securities sold during any consecutive 12-month period in excess of
which the issuer is required to deliver additional disclosures to
investors. Because the amendment is necessary to conform Rule 701(e) to
the requirements of the Act, and involves no exercise of agency
discretion, we find that notice and public comment are unnecessary.\12\
The APA also generally requires that an agency publish an adopted rule
in the Federal Register 30 days before it becomes effective.\13\ This
requirement, however, does not apply if the agency finds good cause for
making the rule effective sooner.\14\ For the same reasons as we are
forgoing notice and comment, we find good cause to make the rules
effective immediately upon publication in the Federal Register. In
addition, we find that the amendment relieves a restriction in our
rules.\15\
---------------------------------------------------------------------------
\10\ See 5 U.S.C. 553(b).
\11\ Id.
\12\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the amendment to become effective notwithstanding
the requirement of 5 U.S.C. 801 (if a federal agency finds that
notice and public comment are impractical, unnecessary, or contrary
to the public interest, a rule shall take effect at such time as the
federal agency promulgating the rule determines). The amendment also
does not require analysis under the Regulatory Flexibility Act. See
5 U.S.C. 604(a) (requiring a final regulatory flexibility analysis
only for rules required by the APA or other law to undergo notice
and comment).
\13\ See 5 U.S.C. 553(d).
\14\ Id.
\15\ Id.
---------------------------------------------------------------------------
IV. Economic Analysis
We are mindful of the costs imposed by and the benefits obtained
from our rules and amendments.\16\ The discussion below addresses the
potential economic effects of the amendment, including the likely
benefits and costs. The Commission is adopting an amendment to
implement the specific statutory mandate of Section 507 of the Act. The
legislative history suggests that Section 507 of the Act was intended
to address two concerns with the existing $5 million threshold for
requiring additional disclosure. Namely, that the additional disclosure
makes it more expensive for companies to compensate their employees
with the company's stock and that this disclosure puts non-reporting
companies at risk of disclosing confidential financial information.\17\
By increasing the threshold from $5 million to $10 million, we believe
that Congress intended to alleviate some of these concerns. The costs
and benefits of this amendment stem entirely from the statutory mandate
of Section 507.\18\ In addition, given that the amendment implements a
statutory mandate and involves no exercise of agency discretion, we
believe there are no reasonable alternatives to the amendment.\19\
---------------------------------------------------------------------------
\16\ Section 2(b) of the Securities Act [15 U.S.C. 77b(b)]
requires the Commission, when engaging in rulemaking where it is
required to consider or determine whether an action is necessary or
appropriate in the public interest, to consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition and capital formation.
\17\ See, e.g., Report of the Financial Services Committee of
the House of Representatives to H.R. 1343 (``These exemptions assist
privately-held companies that want to provide their employees with
the option to purchase the company's securities to increase employee
ownership. . . . Rule 701 should be updated by raising the $5
million threshold requirement because the disclosures make it more
expensive for companies to compensate their employees with the
company's stock. In addition, these disclosure requirements put
private companies at risk of disclosing confidential financial
information.'').
\18\ As the intent of this rulemaking is to implement the
specific regulatory change mandated by Congress, this analysis
focuses on the economic effects arising from that change.
\19\ As noted above, concurrent with the adoption of this
amendment, we are issuing a concept release requesting public
comment on various other issues relating to Rule 701.
---------------------------------------------------------------------------
A. Baseline
The baseline for our economic analysis is the disclosure
requirement of Item 701(e) prior to the amendment being adopted, which
required an issuer to deliver additional disclosures to investors if
the aggregate sales price or amount of securities sold during any
consecutive 12-month period exceeded $5 million. The amendment will
affect non-reporting companies that rely on Rule 701 to offer
securities to plan
[[Page 34942]]
participants pursuant to compensatory benefit plans. In particular, the
amendment will affect non-reporting companies that issue, or seek to
issue, between $5 million and $10 million in a 12-month period. Non-
reporting companies that issue less than $5 million or more than $10
million in a 12-month period will not be affected by the amendment. The
Commission lacks data on non-reporting companies that rely on, or seek
to rely on, Rule 701 to offer securities pursuant to compensatory
benefit plans. We can approximate the number of growth companies with
external financing needs using data on companies conducting exempt
securities offerings under Regulation D, Regulation A, and Regulation
Crowdfunding. This group may be likely to rely on Rule 701 for the
purpose of offering competitive compensation packages to attract and
retain key individuals. Based on filings in 2017, we estimate there are
approximately 16,491 non-reporting companies conducting exempt
offerings of unregistered securities under the aforementioned
exemptions.\20\ Some of these companies may currently be too small to
offer securities in compensatory benefit plans that would fall in the
$5 million to $10 million range over a 12-month period, but could
potentially be able to do so in the future if they successfully grow
their businesses. We do not have access to equivalent data for non-
reporting foreign private issuers, who also can rely on Rule 701 to
offer securities pursuant to compensatory benefit plans.
---------------------------------------------------------------------------
\20\ Based on staff analysis of EDGAR filings in calendar year
2017, there were approximately 15,960 non-reporting operating
companies conducting Regulation D offerings. In addition, there were
88 newly qualified offerings under Regulation A during calendar year
2017, excluding post-qualification amendments and withdrawn
offerings. Finally, 443 non-reporting companies conducted offerings
solely under Regulation Crowdfunding in 2017 (companies conducting
both Regulation D and Regulation Crowdfunding offerings in 2017 are
included in the number for Regulation D offerings).
---------------------------------------------------------------------------
Plan participants who make use of issuer disclosures will also be
affected by the amendment mandated by the Act. To the extent a company
issues more than $5 million but less than $10 million in aggregate
sales price of securities under the rule in a 12-month period, the
company will not be required to deliver the Rule 701(e) disclosures to
plan participants.
B. Economic Effects of the Amendment
The statutory mandate requires the Commission to raise the
threshold for requiring issuers to deliver additional disclosure to
plan participants in Rule 701 offerings from $5 million to $10 million
in any consecutive 12-month period. This will lower the regulatory
burden in terms of required disclosures and thereby reduce the cost of
securities offerings in this range pursuant to compensatory benefit
plans by affected non-reporting companies. In addition, if the
regulatory burden under the baseline currently deters some non-
reporting companies from using this form of compensation arrangement to
an extent that otherwise would be desired, such companies may be able
to improve the efficiency of their employee compensation plans or
contracts under the amendment and thereby improve company performance
(e.g., through improved incentive provisions). Such increases in
efficiency may permit these companies to deploy resources more
productively. Further, these efficiency gains may be passed through to
some plan participants through increases in the value of securities
offered by non-reporting companies as these companies are able to avail
themselves of the Rule 701 exemption without having to provide the
previously required disclosure.
The amendment may reduce the amount of information available to
plan participants, as issuers conducting offerings in the $5 million to
$10 million range will not be required to provide Rule 701(e)
disclosures to investors a reasonable period of time before the date of
sale. Less information to plan participants may in turn make it harder
for them to accurately value the offerings, and may partially offset
the efficiency gains noted above. To the extent non-reporting issuers
have issued securities in reliance on Regulation A and made available
the information required by Rule 701(e) or have issued securities in
excess of $5 million in reliance on Rule 701 in the current 12-month
period, and, at their option, continue to provide the disclosures
required by Rule 701(e), there may be no loss of information to
participants.\21\
---------------------------------------------------------------------------
\21\ Based on a review of Regulation A offering statements,
irrespective of the offering amount sought, the staff identified
approximately seven cases of companies that disclosed unregistered
securities sold in reliance upon Rule 701 in the past twelve months
in Part I of Form 1-A; however, this would not account for companies
that have conducted a Regulation A offering and subsequently have
relied upon Rule 701 for unregistered sales.
---------------------------------------------------------------------------
We expect the amendment to make compliance burdens the same between
companies seeking to use Rule 701 to offer amounts up to $5 million and
companies seeking to use Rule 701 to offer amounts between $5 million
and $10 million. By doubling the amount of securities that can be
offered to employees without requiring the additional disclosure under
Rule 701(e) from $5 million to $10 million, the amendment to Rule 701
may have competitive effects for non-reporting companies that offer or
sell securities as compensation. Although the Commission does not
anticipate that the amendment will have substantial competitive effects
among firms that currently rely on Rule 701, the amendment may permit
some smaller companies to compete with larger companies to recruit and
retain employees by increasing the offering amount threshold for
additional disclosure from $5 million to $10 million.
Relatedly, companies seeking to offer amounts between $5 million
and $10 million will experience a reduction in regulatory burden
compared to companies wishing to offer amounts over $10 million. As
discussed below in Section V.A, for the purposes of the Paperwork
Reduction Act, the Commission estimates that approximately 10% of the
16,149 non-reporting companies, or 1,600 issuers, provide information
under Rule 701, and that approximately one-half of those issuers (800)
will sell securities in compensatory benefit plans between $5 million
to $10 million over a 12-month period. Using these estimates, we
further estimate that the amendment will reduce the regulatory burden
associated with Rule 701 by 400 hours of company personnel time and
$480,000 in professional costs per year.
Finally, to the extent compensatory benefit plans are used by non-
reporting companies to attract and retain persons that are in demand
internationally, a reduction in regulatory burden due to the amendment
of Rule 701(e) may also increase the international competiveness of the
companies affected by the amendment.
V. Paperwork Reduction Act
A. Background and Summary
Certain provisions of Rule 701 that will be affected by the
amendment contain ``collection of information'' requirements within the
meaning of the Paperwork Reduction Act of 1995 (``PRA'').\22\ The
Commission is submitting the amendment to the Office of Management and
Budget (``OMB'') for review in accordance with the PRA.\23\ The title
for the affected collection of information is:
---------------------------------------------------------------------------
\22\ 44 U.S.C. 3501 et seq.
\23\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------
Rule 701 (OMB Control No. 3235-0522).
[[Page 34943]]
Rule 701 provides an exemption from registration for offers and
sales of securities pursuant to certain compensatory benefit plans and
contracts relating to compensation. Issuers conducting employee benefit
plan offerings in excess of $5 million in reliance on Rule 701 are
required to provide plan participants with certain disclosures,
including financial statement disclosures. This disclosure constitutes
a collection of information. An agency may not conduct or sponsor, and
a person is not required to respond to, a collection of information
requirement unless it displays a currently valid OMB control number.
Compliance with the information collection is mandatory. Responses to
the information collection are not kept confidential and there is no
mandatory retention period for the information disclosed.
We estimate that currently approximately 1,600 issuers \24\ provide
information under Rule 701, and that the estimated number of burden
hours per respondent is two.\25\ Therefore, we estimate an aggregate of
3,200 burden hours per year. The portion of the burden carried by
outside professionals is reflected as a cost, while the portion of the
burden carried by the issuer internally is reflected in hours. We
estimate that 25% of the burden per response is completed by the issuer
internally and the other 75% of burden per response is attributed to
outside cost, using $400 as the professional cost per burden hour.\26\
We believe the amendment will reduce the current burden estimates
associated with Rule 701 for issuers that sell securities in
compensatory benefit plans in the $5 million to $10 million range over
a 12-month period, especially for issuers that do not otherwise prepare
the same types of disclosure in their normal course of business. We
estimate this will impact one-half of the issuers that currently
provide information under Rule 701, or 800 issuers.
---------------------------------------------------------------------------
\24\ See Section IV.A, above. While we estimate that there are
16,491 non-reporting companies conducting exempt offerings of
unregistered securities under Regulation A, Regulation Crowdfunding
and Regulation D, some of these issuers may currently be too small
to offer securities in compensatory benefit plans in excess of $5
million over a 12-month period. For purposes of this PRA analysis,
we estimate that approximately 10% of those issuers currently
provide information under Rule 701.
\25\ Issuers are required to provide information that is similar
to, but not as extensive as, the information required by Form 1-SA
[17 CFR 239.90], the semiannual report required to be filed with the
Commission under Regulation A [17 CFR 230.251 through 230.263]. We
believe, however, that many of these issuers already prepare the
same types of disclosure in their normal course of business, such as
for using other exemptions, so we estimate that the burden is two
hours.
\26\ We recognize that the costs of retaining outside
professionals may vary depending on the nature of the professional
services, but for purposes of this PRA analysis we estimate that
such costs will be an average of $400 per hour. This estimate is
based on consultations with several registrants, law firms and other
persons who regularly assist registrants in preparing and filing
periodic reports with the Commission.
---------------------------------------------------------------------------
We therefore estimate the total annual decrease in the paperwork
burden for all affected companies to comply with the collection of
information requirements of Rule 701, as amended, will be approximately
1,600 hours, allocated as a decrease of 400 hours (800 issuers x 0.5
burden hour) of company personnel time and a decrease of $480,000 of
professional costs (800 issuers x 1.5 hours x $400 per hour).
Table 1--Decrease in Paperwork Burden Under the Final Amendment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
number of Decrease in Total decrease 75% Professional
affected burden hours in burden hours 25% Company Professional costs
responses per response
(A) (B) (C) = (A) *(E) = (C) * (E) = (C) * (F) = (E) *
0.25 0.75 $400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rule 701(e) disclosure............................ 800 2 (1,600) (400) (1,200) ($480,000)
--------------------------------------------------------------------------------------------------------------------------------------------------------
B. Request for Comment
We request comments in order to evaluate: (1) Whether the
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information would
have practical utility; (2) the accuracy of our estimate of the burden
of the collection of information; (3) whether there are ways to enhance
the quality, utility and clarity of the information to be collected;
and (4) whether there are ways to minimize the burden of the collection
of information on those who are to respond, including through the use
of automated collection techniques or other forms of information
technology.
Any member of the public may direct to us any comments concerning
the accuracy of these burden estimates and any suggestions for reducing
the burdens. Persons who desire to submit comments on the collection of
information requirements should direct their comments to the Office of
Management and Budget, Attention: Desk Officer for the Securities and
Exchange Commission, Office of Information and Regulatory Affairs,
Washington, DC 20503, and send a copy of the comments to Brent J.
Fields, Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090, with reference to File No. S7-17-18.
Requests for materials submitted to the OMB by us with regard to these
collections of information should be in writing, refer to File No. S7-
17-18 and be submitted to the Securities and Exchange Commission,
Office of FOIA Services, 100 F Street NE, Washington, DC 20549-0213.
Interested persons are encouraged to send comments to the OMB by August
23, 2018.
VI. Statutory Authority
The amendment contained in this release is adopted under the
authority set forth in sections 3(b), 19(a), and 28 of the Securities
Act and section 507 of the Economic Growth, Regulatory Relief, and
Consumer Protection Act.
List of Subjects in 17 CFR Part 230
Reporting and recordkeeping requirements, Securities.
Text of Amendment
For the reasons set out in the preamble, title 17 chapter II of the
Code of Federal Regulations is amended as follows:
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
0
1. The authority citation for part 230 continues to read in part as
follows:
[[Page 34944]]
Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h,
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126
Stat. 313 (2012), and Pub. L. 115-174, sec. 507, 132 Stat. 1296
(2018), unless otherwise noted.
* * * * *
0
2. Section 230.701 is amended by revising the introductory text of
paragraph (e) to read as follows:
Sec. 230.701 Exemption for offers and sales of securities pursuant
to certain compensatory benefit plans and contracts relating to
compensation.
* * * * *
(e) Disclosure that must be provided. The issuer must deliver to
investors a copy of the compensatory benefit plan or the contract, as
applicable. In addition, if the aggregate sales price or amount of
securities sold during any consecutive 12-month period exceeds $10
million, the issuer must deliver the following disclosure to investors
a reasonable period of time before the date of sale:
* * * * *
By the Commission.
Dated: July 18, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018-15730 Filed 7-23-18; 8:45 am]
BILLING CODE 8011-01-P
