SEC updates Rule 701 guidance
The SEC released new and revised guidance on Rule 701 governing equity compensation for private companies, a technical shift that will ripple to compensation and nom/gov committees as startups approach IPOs or liquidity events. Directors and committee chairs should track how the reinterpretation affects grant disclosures and compliance processes. (jdsupra.com)
March 6, 2026: the SEC’s Division of Corporation Finance published updated Compliance & Disclosure Interpretations that add new Question 271.26 and 271.27 and revise multiple Rule 701 CDIs. (sec.gov) New Question 271.26 clarifies that issuers must provide Rule 701(e)(1)–(6) disclosure once aggregate sales under Rule 701 exceed $10 million within any consecutive 12‑month period. (thecorporatecounsel.net) Question 271.27 states that if required Rule 701(e) disclosure is not provided “within a reasonable period” before the date of sale, the issuer loses the Rule 701 exemption for the entire offering during the 12‑month period in which the $10 million threshold is exceeded. (thecorporatecounsel.net) Revised Question 271.10 confirms that when an option is repriced at a lower exercise price within 12 months, the original grant may be excluded from certain calculations but the repriced award is treated as a new sale and counts toward the 12‑month aggregate. (whatstrending.fenwick.com) Revised Question 271.14 requires foreign issuers whose Rule 701 sales exceed $10 million to deliver financial statements no more than 180 days old, regardless of whether those statements are reconciled to U.S. GAAP or prepared under IFRS. (whatstrending.fenwick.com) Revised Questions 271.16 and 271.23 confirm (1) Rule 701 remains available after suspension or termination of Exchange Act reporting and (2) an acquirer must include a target’s Rule 701 sales in the same consecutive 12‑month period when assessing the $10 million threshold post‑merger. (whatstrending.fenwick.com) The CDI batch also replaced outdated $5 million references with $10 million across multiple Rule 701 CDIs and updated related CDI cross‑references, reflecting the existing statutory threshold adjustment made in 2018. (thecorporatecounsel.net)
