Dodd-Frank Regulatory Reform Bill Provides Flexibility for More Stock-Based Compensation
By: Stuart H. Gelfond, Lee T. Barnum, Ian L. Cohen
Recently, the President signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), a bill aiming to reform certain aspects of the Dodd-Frank financial regulatory regime. The Act also provides relief for issuers of stock-based compensation from certain disclosure burdens of the federal securities laws in Rule 701 offerings. The requirement to prepare public-company style disclosure, possibly coupled with the risk that sensitive financial information may become widely disseminated in the event of a broad-based exempt offering to employees that requires an offering document as specified by Rule 701(e), may have the unintended consequence of accelerating a company's IPO timetable or limiting its ability to provide appropriate compensation to employees. For private companies that may be constrained in their ability to offer cash compensation, the additional flexibility afforded by the revisions to Rule 701 can provide a longer time horizon before going public.
