On October 19, 2016, the SEC's Division of Corporation Finance issued:

Revised Question 271.04 sets out a fact pattern in which a company that is not subject to the reporting requirements of Exchange Act Section 13 or 15(d) issued options in reliance on Rule 701 and is later acquired by another company that both:

The revised C&DI states that the acquiring company does not need to register the offer and sale of the shares issuable upon the exercise of the options in reliance on Rule 701 because Rule 701(b)(2) permits an issuer to rely on Rule 701 to sell securities offered prior to the issuer becoming a reporting company, and an acquirer that is subject to Exchange Act reporting requirements may rely on Rule 701 for the exercise of the assumed options. The revised C&DI further notes that, for purposes of complying with any disclosure required by Rule 701(e), the acquirer's Exchange Act reports would satisfy those disclosure requirements.

Question 271.04 had previously stated that the acquiring company could not rely on Rule 701(b)(2) to exempt the exercise of the options.

New Question 271.24 sets out a fact pattern in which an issuer relies on Rule 701 to exempt the offer and sale of a restricted stock unit (RSU) award it is making to one of its employees. The RSU award will settle once conditions are satisfied based on length of service or company performance. The employee does not pay any additional consideration at the time of settlement. The C&DI asks when the issuer is required to provide additional information, if the issuer sells an aggregate amount of securities (including the RSUs) during the consecutive 12-month period that exceeds $5 million, thereby triggering the requirement to deliver the additional information specified in paragraphs (1) through (4) of Rule 701(e). Under Rule 701(e), the issuer must deliver this information a reasonable period of time before the date of the sale. The C&DI states that, when relying on Rule 701 for exemption for an RSU award, the date of sale is the date the award is granted. Therefore, the issuer must provide the required information a reasonable time before the date the RSU award is granted. Although RSUs are derivative securities, they are not "exercised or converted" and, therefore, Rule 701(e)(6) relating to the exercise or conversion of derivative securities does not apply.

Revised Question 532.06 discusses Question 23 of Securities Act Release No. 6099 (Aug. 2, 1979), which covers the commencement of the Rule 144(d) holding period for restricted securities issued under a written agreement, and provides that the holding period starts when the person who will receive the securities is deemed to have paid for the securities and thereby assumed the full risk of economic loss with respect to them. The C&DI states that the holding period for restricted securities that an employee receives under an individually negotiated employment agreement begins when investment risk for the securities passes to the employee (which is the date that the employee is deemed to have paid for them). For full value awards, if the vesting of the securities is conditioned solely on continued employment or satisfaction of performance conditions that are not tied to the employee's individual performance and the employee pays no further consideration for the securities, the date investment risk passes to the employee would be the date of the agreement. For awards that require additional payment upon exercise, conversion, or settlement, that date would be the date on which the payment is made.

Question 532.06 had previously discussed Question 22 of Securities Act Release No. 6099, which covers the holding period under Rule 144(d) for restricted securities under an employee benefit plan.