[Federal Register Volume 81, Number 90 (Tuesday, May 10, 2016)]
[Rules and Regulations]
[Pages 28689-28706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10746]



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  Federal Register / Vol. 81, No. 90 / Tuesday, May 10, 2016 / Rules 
and Regulations  

[[Page 28689]]



SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230 and 240

[Release No. 33-10075; 34-77757; File No. S7-12-14]
RIN 3235-AL40


Changes to Exchange Act Registration Requirements To Implement 
Title V and Title VI of the JOBS Act

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are amending our rules in light of the statutory changes 
made by Title V and Title VI of the Jumpstart Our Business Startups Act 
(the ``JOBS Act'') and Title LXXXV of the Fixing America's Surface 
Transportation Act (the ``FAST Act''). The amendments revise our rules 
to reflect the new, higher thresholds for registration, termination of 
registration and suspension of reporting that were set forth in the 
JOBS Act and the FAST Act. In addition, the amendments revise the 
definition of ``held of record'' in Rule 12g5-1 under the Securities 
Exchange Act of 1934 (the ``Exchange Act''), in accordance with the 
JOBS Act, to exclude certain securities held by persons who received 
them pursuant to employee compensation plans and establish a non-
exclusive safe harbor for determining whether securities are ``held of 
record'' for purposes of registration under Exchange Act Section 12(g).

DATES: Effective June 9, 2016.

FOR FURTHER INFORMATION CONTACT: Steven G. Hearne, Senior Special 
Counsel, at (202) 551-3430, or Anne Krauskopf, Senior Special Counsel, 
at (202) 551-3500, Division of Corporation Finance, Securities and 
Exchange Commission, 100 F Street NE., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Rules 3b-4,\1\ 
12g-1,\2\ 12g-2,\3\ 12g-3,\4\ 12g-4,\5\ 12g5-1,\6\ and 12h-3 \7\ under 
the Exchange Act \8\ and amendments to Rule 405 \9\ under the 
Securities Act of 1933 (the ``Securities Act'').\10\
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    \1\ 17 CFR 240.3b-4.
    \2\ 17 CFR 240.12g-1.
    \3\ 17 CFR 240.12g-2.
    \4\ 17 CFR 240.12g-3.
    \5\ 17 CFR 240.12g-4.
    \6\ 17 CFR 240.12g5-1.
    \7\ 17 CFR 240.12h-3.
    \8\ 15 U.S.C. 78a et seq.
    \9\ 17 CFR 230.405.
    \10\ 15 U.S.C. 77a et seq.
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Table of Contents

I. Introduction
II. Amendments Relating To Exchange Act Reporting Thresholds
    A. Application of the Increased Thresholds for Registration and 
Reporting Obligations
    B. Application of the Increased Threshold for Accredited 
Investors
III. Amendments to Exchange Act Rule 12g5-1
    A. Statutory Requirement and Definition of ``Employee 
Compensation Plan''
    B. Definition of ``Held of Record''
    C. Non-exclusive Safe Harbor for Determining Holders of Record
    D. Foreign Private Issuers
IV. Economic Analysis
    A. Baseline
    B. Analysis of the Rules
V. Paperwork Reduction Act
VI. Final Regulatory Flexibility Act Analysis
    A. Need for, and Objectives of, the Action
    B. Significant Issues Raised by Public Comment
    C. Small Entities Subject to the Rule Amendments
    D. Reporting, Recordkeeping and Other Compliance Requirements
    E. Agency Action To Minimize Effect on Small Entities
VII. Statutory Authority and Text of Rule Amendments

I. Introduction

    On December 17, 2014, we proposed amendments \11\ to implement 
Title V and Title VI of the JOBS Act.\12\ The JOBS Act amended Sections 
12(g) \13\ and 15(d) \14\ of the Exchange Act to adjust the thresholds 
for registration, termination of registration and suspension of 
reporting.\15\ Specifically, Section 501 of the JOBS Act \16\ amended 
Section 12(g)(1) of the Exchange Act \17\ to require an issuer to 
register a class of equity securities (other than exempted securities) 
within 120 days after its fiscal year-end if, on the last day of its 
fiscal year, the issuer has total assets of more than $10 million and 
the class of equity securities is ``held of record'' by either (i) 
2,000 persons, or (ii) 500 persons who are not accredited investors. 
Section 601 of the JOBS Act \18\ further amended Exchange Act Section 
12(g)(1) to require an issuer that is a bank or a bank holding company, 
as defined in Section 2 of the Bank Holding Company Act of 1956,\19\ to 
register a class of equity securities (other than exempted securities) 
within 120 days after the last day of its first fiscal year ended after 
the effective date of the JOBS Act, on which the issuer has total 
assets of more than $10 million and the class of equity securities is 
``held of record'' by 2,000 or more persons. Section 601 of the JOBS 
Act also amended Exchange Act Section 12(g)(4) \20\ and Exchange Act 
Section 15(d)(1) \21\ to enable an issuer that is a bank or a bank 
holding company to terminate the registration of a class of securities 
under Section 12(g) or suspend reporting under Section 15(d)(1) if that 
class is held of record by less than 1,200 persons.\22\ For other 
issuers, the threshold in Section 12(g)(4) for termination of 
registration and in Section 15(d)(1) for suspension of reporting 
remained at 300.\23\ In addition, Section 502 of the JOBS Act \24\ 
amended Exchange Act Section 12(g)(5) \25\ to exclude from the 
definition of ``held of record,'' for the purposes of determining 
whether an issuer is required to register a class of equity securities, 
securities that are held by persons who received

[[Page 28690]]

them pursuant to an ``employee compensation plan'' in transactions 
exempted from the registration requirements of Section 5 of the 
Securities Act.\26\ Section 503 of the JOBS Act \27\ directed the 
Commission to revise the definition of ``held of record'' pursuant to 
Exchange Act Section 12(g)(5) to implement the amendment made by 
Section 502 of the JOBS Act, and to create a safe harbor for issuers 
when determining whether holders received their securities pursuant to 
an ``employee compensation plan'' in a transaction exempted from the 
registration requirements of Section 5 of the Securities Act.
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    \11\ Changes to Exchange Act Registration Requirements to 
Implement Title V and Title VI of the JOBS Act, Release No. 33-9693 
(Dec. 17, 2014) [79 FR 78343 (Dec. 30, 2014)] (the ``Proposing 
Release'').
    \12\ Public Law 112-106, 126 Stat. 306 (Apr. 5, 2012).
    \13\ 15 U.S.C. 78l(g).
    \14\ 15 U.S.C. 78o(d).
    \15\ The changes to Exchange Act Sections 12(g)(1), 12(g)(4) and 
15(d)(1) were effective upon enactment of the JOBS Act and do not 
require any Commission action.
    \16\ Sec. 501, 126 Stat. at 325.
    \17\ 15 U.S.C. 78l(g)(1).
    \18\ Sec. 601, 126 Stat. at 326.
    \19\ 12 U.S.C. 1841.
    \20\ 15 U.S.C. 78l(g)(4).
    \21\ 15 U.S.C. 78o(d)(1).
    \22\ See supra note 18.
    \23\ See 15 U.S.C. 78l(g)(4) and 15 U.S.C. 78o(d)(1).
    \24\ Sec. 502, 126 Stat. at 326.
    \25\ 15 U.S.C. 78l(g)(5).
    \26\ 15 U.S.C. 77e.
    \27\ Sec. 503, 126 Stat. at 326.
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    Subsequent to our proposal, Section 85001 of the FAST Act \28\ 
adjusted the Exchange Act thresholds for registration, termination of 
registration and suspension of reporting for savings and loan holding 
companies, as defined in Section 10 of the Home Owners' Loan Act,\29\ 
so that they would be the same as the thresholds for banks and bank 
holding companies. This change also was effective upon enactment.
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    \28\ Public Law 114-94 (Dec. 4, 2015).
    \29\ 12 U.S.C. 1461.
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    In connection with the amendments made by Title V and Title VI of 
the JOBS Act and Title LXXXV of the FAST Act, we are amending our rules 
to reflect the new, higher registration, termination of registration 
and suspension of reporting thresholds under amended Exchange Act 
Sections 12(g)(1), 12(g)(4) and 15(d)(1). We are also amending Exchange 
Act Rule 12g5-1 to reflect the amendment to Exchange Act Section 
12(g)(5) and to establish a non-exclusive safe harbor that issuers may 
follow when determining if securities held by persons who received them 
pursuant to an employee compensation plan in transactions exempted from 
the registration requirements of Section 5 of the Securities Act may be 
excluded when determining whether they are required to register under 
Exchange Act Section 12(g)(1).
    The comment period for the proposed amendments closed on March 2, 
2015. We received 11 comment letters on the Proposing Release, which 
generally supported the proposals.\30\ We have reviewed and considered 
all of these comments. We are adopting the amendments substantially as 
proposed, and discuss these amendments and any modifications or 
clarifications in detail below.
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    \30\ We also considered pre-proposal comment letters when 
formulating the proposed amendments. Pre-proposal comment letters 
received on Title V of the JOBS Act are available at http://www.sec.gov/comments/jobs-title-v/jobs-title-v.shtml and on Title VI 
of the JOBS Act at http://www.sec.gov/comments/jobs-title-vi/jobs-title-vi.shtml.
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II. Amendments Relating to Exchange Act Reporting Thresholds

A. Application of the Increased Thresholds for Registration and 
Reporting Obligations

    Sections 501 and 601 of the JOBS Act amended the Exchange Act to 
raise the total assets and held of record thresholds under which 
issuers are required to register or permitted to terminate registration 
or suspend reporting pursuant to Section 12(g) and 15(d) of the 
Exchange Act. Section 85001 of the FAST Act further amended these 
provisions to apply the new statutory thresholds for banks and bank 
holding companies to savings and loan holding companies.
1. Proposed Rule Amendments
    To harmonize our rules with the statutory changes made to Exchange 
Act Sections 12(g)(1), 12(g)(4) and 15(d), we proposed amendments to 
Exchange Act Rules 12g-1, 12g-2, 12g-3, 12g-4 and 12h-3, the rules that 
govern the mechanics relating to registration, termination of 
registration under Section 12(g) and suspension of reporting 
obligations under Section 15(d). These rules generally reflected the 
holder of record statutory thresholds in Sections 12(g) and 15(d) prior 
to the enactment of the JOBS Act.\31\
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    \31\ Prior to adoption of the JOBS Act, the Commission used its 
general exemptive authority to provide for a $10 million asset 
threshold by rule. JOBS Act Section 501 amended Exchange Act Section 
12(g)(1) to raise the statutory threshold from $1 million to $10 
million to match the threshold previously provided in Exchange Act 
Rule 12g-1.
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    We proposed to revise Rule 12g-1 to reflect the asset and holder of 
record thresholds established by Titles V and VI of the JOBS Act 
relating to the requirement to register a class of equity securities 
under the Exchange Act.\32\ Similarly, we proposed to revise Exchange 
Act Rules 12g-2 \33\ and 12g-3 \34\ to reflect the holders of record 
thresholds in the Exchange Act, as amended by the JOBS Act, for 
terminating registration and suspending reporting for banks and bank 
holding companies. In addition, we proposed to amend Exchange Act Rules 
12g-4 and 12h-3, the rules which permit issuers to immediately suspend 
their duty to file periodic and current reports, to reflect the new 
thresholds in Sections 12(g) and 15(d) enacted by the JOBS Act for 
banks and bank holding companies.
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    \32\ We also proposed to remove the reference to an automated 
inter-dealer quotation system since the NASDAQ Stock Market is now 
registered as a securities exchange with the Commission. See In the 
Matter of the Application of the Nasdaq Stock Market LLC for 
Registration as a National Securities Exchange; Findings, Opinion 
and Order of the Commission, Release No. 34-53128 (Jan. 13, 2006) 
[71 FR 3550 (Jan. 23, 2006)].
    \33\ Rule 12g-2 addresses securities deemed to be registered 
pursuant to Section 12(g)(1) upon termination of certain exemptions.
    \34\ Rule 12g-3 addresses the threshold for the registration of 
securities of successor issuers under Section 12(b) or Section 
12(g).
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    In light of the fact that savings and loan holding companies 
provide similar services to banks and bank holding companies and are 
generally subject to similar bank regulatory and supervision 
requirements, we also proposed to use our general exemptive authority 
to apply the same registration thresholds applicable to banks and bank 
holding companies to savings and loan holding companies and to revise 
our rules accordingly. As noted above, subsequent to this proposal, the 
FAST Act amended the Exchange Act to apply the new statutory thresholds 
for banks and bank holding companies to savings and loan holding 
companies.\35\
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    \35\ Because of the FAST Act amendment to the Exchange Act, the 
Commission no longer needs to adopt changes relating to those 
thresholds using its general exemptive authority.
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    Because the new statutory threshold for banks, savings and loan 
holding companies and bank holding companies is not reflected in our 
existing rules, such institutions seeking to rely on the new 1,200 
holder of record threshold to terminate registration and suspend 
reporting are not able to rely on the existing procedural 
accommodations in our rules to do so immediately. Without the proposed 
amendments, a bank, savings and loan holding company or bank holding 
company is required to wait 90 days after filing a certification with 
the Commission that the number of its holders of record is less than 
1,200 persons to terminate its Section 12(g) registration and cease 
filing reports required by Exchange Act Section 13(a),\36\ rather than 
being able to suspend its Section 13(a) reporting obligations 
immediately upon the filing of a Form 15 \37\ in reliance on the rule. 
Similarly, without the proposed amendments, banks, savings and loan 
holding companies or bank holding companies may not rely on Rule 12h-3 
to immediately suspend their Section 15(d) reporting obligations using 
the new higher statutory threshold during a fiscal year. Rather, 
Section 15(d)(1) provides for suspending a Section 15(d) obligation 
only at the beginning of a fiscal year.
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    \36\ 15 U.S.C. 78m(a).
    \37\ 17 CFR 249.323.

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[[Page 28691]]

2. Comments on Proposed Rule Amendments
    We received comments on the proposed amendments from two 
commenters.\38\ These commenters supported the amendments as proposed. 
One commenter further agreed with our determination not to propose 
amendments to our rules relating to Exchange Act registration that 
extend substantially beyond the changes contemplated by the JOBS 
Act.\39\ Several commenters also expressed support for our proposal to 
treat savings and loan holding companies similar to banks and bank 
holding companies for purposes of Exchange Act registration.\40\
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    \38\ See letters from American Bankers Association (Feb. 27, 
2015) (``American Bankers'') and American Bar Association (Apr. 10, 
2015) (``ABA'').
    \39\ See letter from ABA.
    \40\ See letters from American Bankers, ABA and Independent 
Community Bankers Association (Feb. 27, 2015) (``ICBA'').
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3. Final Rule Amendments
    After considering the comments, we are adopting the proposed 
amendments to Exchange Act Rules 12g-1, 12g-2, 12g-3, 12g-4 and 12h-3 
to reflect the statutory changes made by the JOBS Act and the FAST Act. 
As amended, Rule 12g-1 provides that an issuer is not required to 
register a class of equity securities pursuant to Section 12(g)(1) if 
on the last day of its most recent fiscal year:
     The issuer had total assets not exceeding $10 million; or
     The class of equity securities was held of record by fewer 
than 2,000 persons or 500 persons who are not accredited investors (as 
such term is defined in Securities Act Rule 501(a)),\41\ determined as 
of such day rather than at the time of the sale of the securities; or
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    \41\ 17 CFR 230.501(a).
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     in the case of a bank; a savings and loan holding company, 
as such term is defined in section 10 of the Home Owners' Loan Act; or 
a bank holding company, as such term is defined in Section 2 of the 
Bank Holding Company Act of 1956, the class of equity securities was 
held of record by fewer than 2,000 persons.\42\
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    \42\ As observed by one commenter, Section 501 of the JOBS Act 
amended Section 12(g)(1) of the Exchange Act to require an issuer to 
register a class of equity securities (other than exempted 
securities) if, on the last day of its fiscal year, the issuer has 
total assets of more than $10 million and the class of equity 
securities is ``held of record by either 2,000 persons, or 500 
persons who are not accredited investors.'' See letter from Keith P. 
Bishop (Mar. 1, 2016). We read this language to provide that an 
issuer is not required to register under Section 12(g) if the issuer 
has fewer than 2,000 persons, or 500 persons who are not accredited 
investors that hold of record. An issuer with more than 2,000 
persons, or 500 persons who are not accredited investors, that hold 
of record has necessarily met the threshold and would be required to 
register pursuant to Section 12(g)(1)(A).
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    As revised, Rule 12g-2, which addresses securities deemed to be 
registered pursuant to Section 12(g)(1) upon termination of the 
exemption pursuant to Section 12(g)(2)(A) or (B) \43\ and establishes a 
300-person threshold for such a class of securities to be registered 
under Section 12(g), provides a 1,200-person registration threshold for 
a bank, a savings and loan holding company, as such term is defined in 
section 10 of the Home Owners' Loan Act, or bank holding company, as 
defined in Section 2 of the Bank Holding Company Act of 1956.
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    \43\ Section 12(g)(2)(A) [15 U.S.C. 78l(g)(2)(A)] provides an 
exemption from Section 12(g) registration while the class of 
securities is listed and registered on a national securities 
exchange under Exchange Act Section 12(b) [15 U.S.C. 78l(b)]. 
Section 12(g)(2)(B) [15 U.S.C. 78l(g)(2)(B)] provides an exemption 
for securities issued by registered investment companies.
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    Revised Rule 12g-3, which addresses the 300-person threshold for 
the registration of securities of successor issuers under Section 12(b) 
or Section 12(g), similarly provides a 1,200-person registration 
threshold for a bank, a savings and loan holding company, as such term 
is defined in Section 10 of the Home Owners' Loan Act, or bank holding 
company, as defined in Section 2 of the Bank Holding Company Act of 
1956.
    Revised Rule 12g-4(a) provides that termination of registration 
under Section 12(g) shall take effect in 90 days, or such shorter 
period as the Commission determines, after the issuer certifies on Form 
15 that the class of securities is held of record by fewer than 300 
persons, 1,200 persons in the case of a bank, a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act, or a bank holding company, as defined in Section 2 of 
the Bank Holding Company Act of 1956, or 500 persons where the total 
assets of the issuer have not exceeded $10 million on the last day of 
each of the preceding three years. As a result of the changes to Rule 
12g-4(a), banks, savings and loan holding companies and bank holding 
companies will be able to terminate registration of a class of 
securities and suspend immediately their duty to file current and 
periodic reports upon filing a certification on Form 15 at the 1,200 
person threshold.
    Finally, revised Rule 12h-3 provides that the duty to file current 
and periodic reports under Section 13(a) pursuant to Section 15(d) for 
that class of securities is suspended immediately upon the filing of a 
certification on Form 15, provided that the issuer has fewer than 300 
holders of record, 500 holders of record where the issuer's total 
assets have not exceeded $10 million on the last day of each of the 
preceding three years, or in the case of a bank, a savings and loan 
holding company, as such term is defined in Section 10 of the Home 
Owners' Loan Act, or bank holding company, as defined in Section 2 of 
the Bank Holding Company Act of 1956, 1,200 holders of record; the 
issuer has filed its Section 13(a) reports for the most recent three 
completed fiscal years, and for the portion of the year immediately 
preceding the date of filing the Form 15 or the period since the issuer 
became subject to the reporting obligation; and a registration 
statement has not become effective or was required to be updated 
pursuant to Exchange Act Section 10(a)(3) \44\ during the fiscal 
year.\45\
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    \44\ 15 U.S.C. 78j(a)(3).
    \45\ The automatic statutory suspension of an issuer's Section 
15(d) reporting obligation also is not available as to any fiscal 
year in which the issuer's Securities Act registration statement 
becomes effective or is required to be updated pursuant to Section 
10(a)(3) of the Securities Act.
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B. Application of the Increased Threshold for Accredited Investors

    Section 501 of the JOBS Act amended Exchange Act Section 12(g)(1) 
to increase the threshold that triggers registration by an issuer other 
than a bank or bank holding company to total assets exceeding $10 
million and a class of equity securities (other than an exempted 
security) held of record by either 2,000 persons or 500 persons who are 
not accredited investors (as such term is defined by the 
Commission).\46\ To rely on the new, higher threshold established by 
the JOBS Act, an issuer will need to be able to determine which of its 
record holders are accredited investors. A number of pre-proposal 
commenters pointed to potential compliance concerns with respect to 
identifying accredited investors and recommended ways to facilitate 
issuers' use of the increased threshold for holders of record that are 
accredited investors.\47\
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    \46\ The statutory amendment was effective upon enactment of the 
JOBS Act and does not require any Commission action. While this 
change primarily affects issuers that have never had a reporting 
obligation under the Exchange Act, issuers that have terminated 
registration will need to monitor the accredited investor status of 
their holders of record as of the last day of each fiscal year.
    \47\ See, e.g., letters from New York City Bar Association (June 
6, 2012) (``NYCBA''), the Business Law Section of the American Bar 
Association (June 26, 2013) (``ABA Pre-Proposal'') and Foley & 
Lardner (May 24, 2012) (``Foley'').

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[[Page 28692]]

1. Proposed Rule Amendment
    We proposed to amend Rule 12g-1 to make clear that the definition 
of ``accredited investor'' in Securities Act Rule 501(a) applies in 
making determinations under Exchange Act Section 12(g)(1) and that the 
``accredited investor'' determination must be made as of the last day 
of the fiscal year rather than at the time of the sale of the 
securities.\48\ In proposing to use the Rule 501(a) definition, we 
stated our belief that applying the familiar concepts of the accredited 
investor definition in Rule 501(a) to the registration threshold in 
Section 12(g)(1) would facilitate compliance for issuers.\49\ We also 
noted our concern that reliance on information previously provided by 
security holders in connection with the purchase or transfer of 
securities for an indefinite period into the future could result in the 
use of outdated information that may no longer be reliable.\50\
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    \48\ Securities Act Rule 501(a) otherwise defines ``accredited 
investor'' as being determined at the time of the sale of the 
securities.
    \49\ See Proposing Release at Section II.C.
    \50\ Id.
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2. Comments on Proposed Rule Amendment
    We received comments on the proposed approach from five 
commenters.\51\ Four commenters supported the use of the Securities Act 
Rule 501(a) definition.\52\ Two of these commenters requested that the 
Commission provide guidance on how to establish a reasonable belief of 
accredited investor status.\53\ A number of commenters supported 
establishing a safe harbor for the accredited investor determination 
that permits an issuer to rely on previously obtained information 
relating to accredited investor status.\54\ These commenters 
recommended various safe harbors that permit issuers to rely on: 
information obtained at the time securities were initially or most 
recently sold to that person; \55\ an annual self-certification or 
affirmation; \56\ and determinations made by certain third parties.\57\ 
Another commenter provided a more limited recommendation that the 
Commission permit reliance on accredited investor status determinations 
made in offerings during the three months prior to fiscal year-end or 
on self-certification by investors if the offering occurred more than 
three months but less than twelve months prior to fiscal year-end.\58\
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    \51\ See letters from ABA, Alternative & Direct Investment 
Securities Association (Mar. 2, 2015) (``ADISA''), Investment 
Program Association (Mar. 2, 2015) (``IPA''), Securities Arbitration 
Clinic, Cardozo Law School (Mar. 2, 2015) (``Cardozo'') and Managed 
Funds Association (Mar. 2, 2015) (``MFA'').
    \52\ See letters from ABA, ADISA, Cardozo and MFA.
    \53\ See letters from ABA and ADISA. ABA recommended that the 
Commission provide guidance by rule or in the text of the release.
    \54\ See letters from ADISA, Milken Institute Center for 
Financial Markets (Mar. 2, 2015) (``CFM''), Cleary, Gottlieb, Steen 
& Hamilton LLP (Feb. 27, 2015) (``Cleary'') and IPA. CFM suggested 
that a safe harbor would create certainty and predictability for 
issuers and investors. IPA recommended a safe harbor as an 
alternative to determination at time of the last sale and proposed 
that securities sold prior to the effective date of any rule should 
not be subject to reaffirmation of accredited investor status.
    \55\ See letters from ADISA and CFM.
    \56\ See letters from ADISA and IPA. CFM further recommended 
allowing an issuer to assume that an investor's status has not 
changed and to query investors ``as needed'' via a written 
communication.
    \57\ See letters from ADISA, Cleary and IPA. These commenters 
recommended permitting reliance on information from registered 
broker-dealers, registered investment advisers, licensed attorneys, 
or certified public accountants.
    \58\ See letter from Cleary.
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    One commenter opposed a formal safe harbor out of concern it would 
become a de facto minimum standard and recommended instead that the 
Commission provide additional guidance.\59\ Specifically, this 
commenter recommended that:
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    \59\ See letter from ABA.
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     an issuer should be able to rely on information previously 
provided by investors as indicative of their current accredited 
investor status, when there is a reasonable basis for doing so;
     an annual confirmation should only be necessary if there 
was reason to believe that an investor's status had changed;
     an issuer should be able to rely on certification from 
certain third parties; and
     an issuer should not be subject to enforcement if the 
basis was reasonable at the time the conclusion was reached.\60\
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    \60\ See letter from ABA. See also letter from IPA advocating 
against annual recertification, which noted that any future 
adjustments to the definition of accredited investor could affect an 
issuer's number of accredited investors. This could cause issuers to 
be required to register despite an issuer's efforts to sell only to 
an appropriately limited number of accredited and non-accredited 
investors at the time of the offer and sale. ABA recommended a 
presumption that a person continues to be an accredited investor 
under the revised definition to address concerns relating to future 
adjustments to the definition of accredited investor.
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    One commenter recommended that the Commission issue a separate rule 
or safe harbor with respect to private investment funds.\61\ The 
commenter noted that private investment funds that rely on the 
exemption in Investment Company Act Section 3(c)(7) \62\ (``3(c)(7) 
Funds'') may have an unlimited number of investors that are ``qualified 
purchasers,'' a significantly higher standard than ``accredited 
investors.'' The commenter recommended a rule that permits 3(c)(7) 
Funds to continue to rely on their initial determination of a record 
holder's qualified purchaser and accredited investor status on a going 
forward basis without requiring additional annual diligence. In the 
alternative, the commenter recommended that the Commission provide a 
non-exclusive safe harbor that permits 3(c)(7) Funds to send an annual 
negative consent letter to record holders asking them to inform the 
issuer if their accredited investor status has changed and permits 
treatment of a non-response as confirmation of status.
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    \61\ See letter from MFA.
    \62\ 15 U.S.C. 80a-3(c)(7).
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    Two commenters expressed concern about the timing of the 
determination and opposed requiring determination as of the last day of 
the fiscal year.\63\ One of these commenters claimed that annual 
reconfirmation will be costly, will provide little investor protection 
and may cause issuers to sell to fewer investors.\64\ This commenter 
recommended only requiring yearly recertification if there is a ready 
market for the securities and the securities are freely tradable.\65\
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    \63\ See letters from ADISA and IPA. ADISA recommended 
permitting issuers to rely on information available at the time they 
made a judgment, rather than requiring issuers to update information 
as of the end of the fiscal year. IPA recommended that accredited 
investor status be determined at the time of last sale, not 
annually, and expressed concern regarding the administrative and 
reporting costs of determinations required as of the last day of the 
fiscal year.
    \64\ See letter from IPA. IPA cited an estimate of ongoing 
reporting costs under the Exchange Act of $650,000 annually. This 
commenter additionally noted that becoming an Exchange Act reporting 
company may be contrary to an issuer's business plan and against 
investors' economic interests.
    \65\ See letter from IPA. IPA suggested that most affected 
investors will not hold freely tradable securities, muting the 
benefits of public company reporting for those investors.
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3. Final Rule Amendment
    After considering the comments, we are adopting an amendment to 
Rule 12g-1 as proposed, providing that the term ``accredited investor'' 
for purposes of Section 12(g)(1) is as defined in Securities Act Rule 
501(a).\66\ Consistent with the proposal, the ``accredited investor'' 
determination for these

[[Page 28693]]

purposes must be made as of the last day of the issuer's most recent 
fiscal year rather than at the time of the sale of the securities. 
Commenters supported use of the Securities Act Rule 501(a) 
definition.\67\ Rule 501(a) provides that an accredited investor is any 
person who comes within one or more of the categories of investors 
specified therein, or whom the issuer reasonably believes comes within 
any such category. Whether the issuer has a reasonable belief depends 
on the particular facts and circumstances surrounding the 
determination. Under amended Rule 12g-1, an issuer will need to 
determine, based on facts and circumstances, whether prior information 
provides a basis for a reasonable belief that the security holder 
continues to be an accredited investor as of the last day of the fiscal 
year.\68\
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    \66\ Consideration of the use of the ``accredited investor'' 
definition in this context is distinct from other efforts to 
consider the definition. In December 2015, the staff issued a report 
addressing the ``accredited investor'' definition and providing 
certain recommendations for our consideration. See Report on the 
Review of the Definition of Accredited Investor (Dec. 18, 2015), 
available at https://www.sec.gov/corpfin/reportspubs/special-studies/review-definition-of-accredited-investor-12-18-2015.pdf.
    \67\ See letters from ABA, ADISA, Cardozo and MFA.
    \68\ If after the issuer has made its determination as of the 
end of the fiscal year, it is subsequently determined that an 
investor did not, in fact, come within one of the accredited 
investor categories, the issuer may rely on that determination for 
that fiscal year if it had a reasonable belief at the time the 
determination was made.
---------------------------------------------------------------------------

    Although some commenters requested that the Commission provide 
guidance on making the accredited investor determination in the Section 
12(g) context or establish a safe harbor relating to the 
determination,\69\ we have decided against doing so. Our rules do not 
currently provide a safe harbor for the reasonable belief determination 
made under Rule 501(a) for exempt offerings and we do not believe that 
the determinations required for Section 12(g) present a more compelling 
case for having such a safe harbor. Additionally, as one commenter 
noted, a safe harbor could become a de facto minimum standard.\70\ We 
believe that requiring issuers to consider their particular facts and 
circumstances in establishing a reasonable basis for their 
determination provides issuers with appropriate flexibility for making 
the determination.\71\
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    \69\ See letters from ABA, ADISA, CFM, Cleary and MFA.
    \70\ See letter from ABA.
    \71\ One commenter requested that the Commission establish a 
separate safe harbor or rule with respect to private investment 
funds. See letter from MFA. We are declining to provide specific 
relief to private investment funds for reasons similar to those 
discussed for issuers generally. We believe that a standard where 
issuers, including private investment funds, consider their 
particular facts and circumstances in establishing a reasonable 
basis for believing that a security holder is an accredited investor 
is the most appropriate standard to apply at this time.
---------------------------------------------------------------------------

    As adopted, the accredited investor determination under Rule 12g-1 
must be made as of the last day of the issuer's most recent fiscal year 
rather than at the time of the sale of the securities. Several 
commenters recommended that the Commission adopt rules providing that 
the determination need not be made at year-end.\72\ We believe that a 
fiscal year-end determination date is appropriate because the Section 
12(g)(1) requirement to register is triggered if the issuer meets the 
specified asset and held of record thresholds at the end of its fiscal 
year.
---------------------------------------------------------------------------

    \72\ See letters from ADISA and IPA.
---------------------------------------------------------------------------

    Other commenters recommended permitting an issuer to rely on 
previously obtained information relating to accredited investor 
status.\73\ We continue to be concerned that permitting issuers to rely 
solely on previously obtained information, which in some cases could be 
years or decades old, could result in the use of outdated and 
unreliable information when making the determination. One commenter 
suggested that we permit issuers to rely on accredited investor 
determinations made in offerings during the three months prior to 
fiscal year-end or on self-certification by investors if the offering 
occurred more than three months but less than twelve months prior to 
fiscal year-end.\74\ While such information could provide a reasonable 
basis for making a determination about accredited investor status as of 
the end of the fiscal year, for the reasons set forth above, we believe 
that issuers should consider their particular facts and circumstances 
before reaching such a conclusion and that the ``reasonable belief'' 
standard under Rule 501(a) provides issuers with a familiar context and 
appropriate flexibility in making such a determination.
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    \73\ See letters from ABA, CFM, Cleary and MFA.
    \74\ See letter from Cleary.
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III. Amendments to Exchange Act Rule 12g5-1

A. Statutory Requirement and Definition of ``Employee Compensation 
Plan''

    Exchange Act Section 12(g)(5), as amended by Section 502 of the 
JOBS Act, provides that the definition of ``held of record'' shall not 
include securities held by persons who received them pursuant to an 
``employee compensation plan'' in transactions exempted from the 
registration requirements of Section 5 of the Securities Act. By its 
express terms, this new statutory exclusion applies solely for purposes 
of determining whether an issuer is required to register a class of 
equity securities under the Exchange Act and does not apply to a 
determination of whether such registration may be terminated or 
suspended.\75\ The provision, which is substantially broader than the 
Commission's existing rules exempting compensatory employee stock 
options from Section 12(g) registration,\76\ does not define the term 
``employee compensation plan.''
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    \75\ The statutory exclusion in Section 12(g)(5) specifically 
refers to Exchange Act Section 12(g)(1), which relates to when an 
issuer must register its securities with the Commission.
    \76\ Exchange Act Rule 12h-1(f) [17 CFR 240.12h-1(f)] provides 
non-reporting issuers with an exemption from Section 12(g) 
registration for stock options issued under written compensatory 
stock option plans under certain conditions. Exchange Act Rule 12h-
1(g) [17 CFR 240.12h-1(g)] provides reporting issuers a similar 
exemption for such stock options. The exemptions provide specific 
eligibility requirements and are limited to options issued pursuant 
to a written compensatory stock option plan. See Exemption of 
Compensatory Stock Options from Registration Under Section 12(g) of 
the Securities Exchange Act of 1934, Release No. 34-56887 (Dec. 3, 
2007) [72 FR 69554 (Dec. 7, 2007)].
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    Section 503 of the JOBS Act instructs the Commission to amend the 
definition of ``held of record'' to implement the amendment in Section 
502 and to adopt a safe harbor that issuers can use when determining 
whether holders of their securities received them pursuant to an 
employee compensation plan in transactions exempted from the 
registration requirements of Section 5 of the Securities Act.
1. Proposed Rule Amendment
    We did not propose to define the term ``employee compensation 
plan.'' Instead, we proposed to revise the definition of ``held of 
record'' and to additionally establish a non-exclusive safe harbor that 
relies on the current definition of ``compensatory benefit plan'' in 
Rule 701 and the conditions in Rule 701(c).
2. Comments on Proposed Rule Amendment
    We received comments from two commenters generally supportive of 
the proposed amendment.\77\ One of those commenters specifically 
supported our determination not to create a new definition of the term 
``employee compensation plan.'' \78\ This commenter suggested that 
application in a Section 12(g) context of the familiar concepts applied 
by an issuer in connection with its exempt issuances of compensatory 
equity securities under Securities Act Rule 701 would facilitate 
compliance by streamlining the issuer's learning curve and simplifying 
recordkeeping.
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    \77\ See letters from ABA and ADISA.
    \78\ See letter from ABA.

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[[Page 28694]]

3. Final Rule Amendment
    After considering the comments, we are adopting an amendment to 
Rule 12g5-1 to revise the definition of ``held of record,'' and 
establish a non-exclusive safe harbor. By not defining the term 
``employee compensation plan,'' and providing for a non-exclusive safe 
harbor, we believe issuers will have appropriate flexibility to make a 
principles-based determination about securities received as employee 
compensation when determining their holders of record under Section 
12(g)(5), as well as the added certainty of a safe harbor. We further 
believe that developing a new definition for ``employee compensation 
plan'' could result in needless complexity and create potential 
conflicts with the current definitions of ``compensatory benefit plan'' 
and ``employee benefit plan.'' \79\ Finally, we note that by 
conditioning the new exclusion from ``held of record'' upon the 
securities being received pursuant to an employee compensation plan in 
transactions exempted from the registration requirements of Section 5 
of the Securities Act, Section 502 of the JOBS Act uses Securities Act 
concepts to identify persons that an issuer may exclude from its 
determination of the number of holders of record under Section 12(g)(1) 
of the Exchange Act. Because this provision of the JOBS Act includes 
concepts from both the Securities Act and Exchange Act,\80\ we believe 
that it will facilitate compliance if the terminology used in the new 
safe harbor in Exchange Act Rule 12g5-1(a)(8)(ii) is consistent with 
the terminology used in our Securities Act rules.
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    \79\ See Rule 701--Exempt Offerings Pursuant to Compensatory 
Arrangements, Release No. 33-7645 (Feb. 25, 1999) [64 FR 11095 (Mar. 
8, 1999)] (the ``1999 Rule 701 Release''), and Registration of 
Securities on Form S-8, Release No. 33-7646 (Feb. 25, 1999) [64 FR 
11103 (Mar. 8, 1999)] (the ``1999 Form S-8 Release'').
    \80\ This provision of the JOBS Act relies on concepts from both 
the Securities Act and the Exchange Act by establishing that certain 
securities received pursuant to an employee compensation plan in 
transactions exempted from the registration requirements of Section 
5 of the Securities Act may be excluded when determining whether an 
issuer is required to register under Section 12(g) of the Exchange 
Act.
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B. Definition of ``Held of Record''

    Section 503 of the JOBS Act directed the Commission to revise the 
definition of ``held of record'' pursuant to Section 12(g)(5) to 
provide that securities held by persons who received them pursuant to 
an employee compensation plan in transactions exempted from the 
registration requirements of Section 5 of the Securities Act may be 
excluded when calculating the number of holders of record of a class of 
equity securities for purposes of determining the issuer's registration 
obligation under Section 12(g)(1). We received pre-proposal comments 
addressing issues about the scope of the definition. One commenter 
recommended that securities issued in a subsequent transaction 
(including a business combination) that is exempt from, or otherwise is 
not subject to, the registration requirements of Section 5 to eligible 
employees, former employees and other covered persons in exchange for 
securities covered by the Section 12(g)(5) compensatory plan securities 
carve-out also should be excluded.\81\ The same commenter further 
recommended that securities issued in unregistered transactions based 
on the ``no sale'' theory \82\ should be included within the definition 
of ``transactions exempt from Section 5.''
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    \81\ See letter from ABA Pre-Proposal.
    \82\ The ``no sale'' theory relates to the issuance of 
compensatory grants made by employers to broad groups of employees 
pursuant to broad-based stock bonus plans without Securities Act 
registration under the theory that the awards are not an offer or 
sale of securities under Section 2(a)(3) of the Securities Act [15 
U.S.C. 77b(a)(3)]. See Employee Benefit Plans; Interpretations of 
Statute, Release No. 33-6188 (Feb. 1, 1980) [45 FR 8960 (Feb. 11, 
1980)] at Section II.A.5.d; Employee Benefit Plans, Release No. 33-
6281 (Jan. 15, 1981) [46 FR 8446 (Jan. 27, 1981)] at Section III. 
Many issuers rely on the ``no sale'' theory when making such awards 
to employees where no consideration--and hence no ``value''--is 
received by the issuer in return. The staff has not objected to 
these issuances in a series of no-action letters. See, e.g., no-
action letter to Verint Systems Inc. (May 24, 2007).
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1. Proposed Rule Amendment
    We proposed to amend the definition of ``held of record'' to 
provide that when determining whether an issuer is required to register 
a class of equity securities with the Commission pursuant to Exchange 
Act Section 12(g)(1) an issuer may exclude securities that are either:
     held by persons who received the securities pursuant to an 
employee compensation plan in transactions exempt from the registration 
requirements of Section 5 of the Securities Act;
     held by persons who received the securities pursuant to an 
employee compensation plan in transactions that did not involve a sale 
within the meaning of Section 2(a)(3) of the Securities Act; or
     held by persons eligible to receive securities from the 
issuer pursuant to Securities Act Rule 701(c) who received the 
securities in a transaction exempt from the registration requirements 
of Section 5 of the Securities Act in exchange for securities 
excludable under proposed Rule 12g5-1(a)(7).
    Section 502 of the JOBS Act refers specifically to ``transactions 
exempted'' from the Securities Act Section 5 registration requirements. 
A number of issuers, however, issue securities to employees without 
Securities Act registration on the basis that the issuance is not a 
sale under Section 2(a)(3) of the Securities Act and therefore does not 
trigger the registration requirement of Securities Act Section 5, which 
applies only to the offer and sale of securities.\83\ While securities 
issued to employees in transactions that do not involve a sale under 
Section 2(a)(3) are not technically ``transactions exempted from the 
registration requirements of section 5,'' they are similar to other 
compensatory issuances to employees in exempt transactions in that the 
issuer provides the awards to employees for a compensatory purpose. We 
therefore proposed to exclude such ``no sale'' issuances from the 
definition of ``held of record'' in Rule 12g5-1 for purposes of 
determining an issuer's obligation to register a class of securities 
under the Exchange Act.
---------------------------------------------------------------------------

    \83\ See id.
---------------------------------------------------------------------------

    Additionally, we proposed to permit an issuer to exclude securities 
of holders who are persons eligible to receive securities from the 
issuer pursuant to Rule 701(c) and who acquired the securities in 
exchange for securities excludable under the proposed definition. The 
proposed exclusion was intended to facilitate the ability of an issuer 
to conduct restructurings, business combinations and similar 
transactions that are exempt from Securities Act registration so that 
if the securities being surrendered in such a transaction would not 
have been counted under the proposed definition of ``held of record,'' 
the securities issued in the exchange also would not be counted under 
this definition.\84\ The securities issued in the exchange would be 
deemed to have a compensatory purpose because they would replace other 
securities previously issued pursuant to an employee compensation plan. 
We believed such an approach would be consistent with the intent of 
Section 502 of the JOBS Act and would provide issuers with appropriate 
flexibility to conduct certain business combinations and similar 
transactions.
---------------------------------------------------------------------------

    \84\ As proposed and consistent with Rule 701(c), securities 
held of record by former employees would be excluded when 
determining the securities held of record only if the employees were 
employed by or providing services to the surviving issuer at the 
time the exchange securities were offered.

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[[Page 28695]]

2. Comments on Proposed Rule Amendment
    We received comments on the proposed amendment from two commenters, 
both generally supporting the amendment.\85\ One commenter supported 
the proposed amendment to the definition of ``held of record'' to 
implement JOBS Act Section 503, but recommended that the Commission 
clarify and extend the scope of the proposed exclusion for securities 
received in exchange for excludable securities.\86\ The commenter 
recommended that the Commission revise the exclusion for employee 
compensation plan securities acquired through a business combination to 
encompass securities that are ``exempt from, or not subject to, the 
registration requirements of Section 5 of the Securities Act.'' The 
commenter noted that the proposed language, if construed literally, may 
not apply to exempt securities under Section 3 of the Securities Act, 
such as securities issued under Section 3(a)(9) (in connection with 
exchange offers), Regulation A or Rule 504 or 505 of Regulation D, 
because those exemptions are securities-based rather than transaction-
based. Finally, the commenter noted that business combinations do not 
always involve an exchange and suggested additional clarification that 
the rule would apply to securities received ``in exchange for, in 
substitution for or upon conversion or exercise of'' the original 
securities.
---------------------------------------------------------------------------

    \85\ See letters from ABA and ADISA.
    \86\ See letter from ABA.
---------------------------------------------------------------------------

    This commenter additionally recommended that the Commission expand 
the exclusion for securities issued in business combinations and 
similar transactions that replace securities previously issued pursuant 
to an employee compensation plan to include former employees, 
directors, general partners, trustees, officers, or consultants and 
advisors who were employed by, or providing services to, a predecessor 
of the issuer or a company acquired in a business combination. The 
commenter expressed concern that denying the exclusion to former 
employees could inhibit issuers from entering into business combination 
transactions.
3. Final Rule Amendment
    After considering the comments, we are adopting Exchange Act Rule 
12g5-1(a)(8)(i) with the clarifications and changes detailed below.\87\ 
We are amending the definition of ``held of record'' to provide that 
when determining whether an issuer is required to register a class of 
equity securities with the Commission pursuant to Exchange Act Section 
12(g)(1) an issuer may exclude securities that are:
---------------------------------------------------------------------------

    \87\ As part of the amendments to Regulation A, we adopted a new 
Exchange Act Rule 12g5-1(a)(7) providing a conditional exemption to 
the definition of ``held of record'' for securities issued in Tier 2 
Regulation A offerings. Amendments to Regulation A, Rel. No. 33-9741 
(Mar. 25, 2015) [80 FR 21805 (Apr. 20, 2015)]. We proposed to use 
Rule 12g5-1(a)(7) for the exemption and safe harbor under the 
definition of ``held of record'' for certain employee compensation 
plan securities in the Proposing Release. Because Rule 12g5-1(a)(7) 
has been adopted in relation to Regulation A, we are adopting the 
proposed exemption and safe harbor as Exchange Act Rule 12g5-
1(a)(8).
---------------------------------------------------------------------------

     Held by persons who received the securities pursuant to an 
employee compensation plan in transactions exempt from, or not subject 
to, the registration requirements of Section 5 of the Securities Act; 
or
     held by persons who received the securities in a 
transaction exempt from, or not subject to, the registration 
requirements of Section 5 of the Securities Act from this issuer, a 
predecessor of the issuer or an acquired company in substitution or 
exchange for excludable securities under Exchange Act Rule 12g5-
1(a)(8)(i)(A), as long as the persons were eligible to receive 
securities pursuant to Rule 701(c) at the time the excludable 
securities were originally issued to them.
    Consistent with one commenter's suggestion,\88\ we are revising the 
language in new Exchange Act Rule 12g5-1(a)(8)(i)(A) to encompass 
securities received in transactions exempt from, or not subject to, the 
registration requirements of Section 5. Such transactions include 
transactions that did not involve a sale of securities within the 
meaning of Section 2(a)(3) of the Securities Act, as well as 
transactions involving exempt securities, such as sales of securities 
made pursuant to Section 3 of the Securities Act. As we indicated in 
the Proposing Release, while securities issued to employees in 
transactions that do not involve a sale under Section 2(a)(3) are not 
technically ``transactions exempted from the registration requirements 
of Section 5,'' they are similar to other compensatory issuances to 
employees in exempt transactions in that the issuer provides the awards 
to employees for a compensatory purpose. We believe it is consistent 
with the statutory relief to also exclude from the definition of ``held 
of record'' in Rule 12g5-1 exempt securities issued to employees 
pursuant to an employee compensation plan. These exempt securities are 
similarly issued to employees for compensatory purposes and their 
issuance does not require registration under the Securities Act.
---------------------------------------------------------------------------

    \88\ See letter from ABA.
---------------------------------------------------------------------------

    We are adopting new Exchange Act Rule 12g5-1(a)(8)(i)(B) to provide 
relief in the context of business combinations. We are clarifying and 
expanding the proposed relief to encompass securities held by former 
employees of the issuer or its predecessors. In response to a 
commenter's concern that the term ``in exchange for'' is not broad 
enough to capture all of the ways in which a person may receive new 
securities in place of existing securities held prior to a business 
combination, we have revised the language by using the phrase ``in 
substitution or exchange for'' to cover various methods of how those 
securities may be received in place of the existing securities, such as 
upon conversion or exercise of such securities. In response to a 
commenter's concerns,\89\ we are revising proposed Rule 12g5-
1(a)(8)(i)(B) to also permit securities to be excluded if they were 
received by former employees in an exempt transaction in substitution 
or exchange for excludable securities, where the former employees were 
eligible under Rule 701(c) to receive the original securities at the 
time of issuance. Under the exemption as proposed, securities received 
in such an exchange by former employees of an issuer and employees of 
an acquired issuer or the target company in a business combination 
would not have been excludable. Requiring issuers to count those 
securities for Exchange Act registration purposes could, as the 
commenter noted, inhibit issuers from entering into economically 
beneficial business combinations. Such former employees of the issuer, 
and employees of a predecessor of the issuer or an acquired company, 
will have received the original securities pursuant to an employee 
compensation plan in a transaction exempt from, or not subject to, the 
registration requirements of Section 5 of the Securities Act. We 
therefore believe it is appropriate to exclude the securities received 
by these former employees \90\ in such an exchange when determining 
whether an issuer is required to register under Section 12(g)(1).
---------------------------------------------------------------------------

    \89\ Id.
    \90\ Rule 701(c) provides appropriate limitations on who may 
qualify as an employee, former employee, or permitted family member 
transferee. See discussion in Section III.C.3.a.
---------------------------------------------------------------------------

C. Non-Exclusive Safe Harbor for Determining Holders of Record

    Section 503 of the JOBS Act directed the Commission to establish a 
safe

[[Page 28696]]

harbor in Rule 12g5-1 that issuers can rely on when determining if 
securities held by persons who received them pursuant to an employee 
compensation plan in transactions exempted from the registration 
requirements of Section 5 of the Securities Act may be excluded when 
calculating the number of holders of record of a class of equity 
securities for purposes of determining the issuer's registration 
obligation under Section 12(g)(1). One pre-proposal commenter 
recommended that the Commission expressly provide a non-exclusive safe 
harbor akin to the Securities Act Rule 506 safe harbor under Securities 
Act Section 4(a)(2).\91\ This commenter recommended that the safe 
harbor provide that an issuer may treat an issuance of securities as 
exempt from Securities Act registration for purposes of Section 
12(g)(5) if that issuer had a reasonable belief that the exemption was 
available at the time the securities were issued.\92\
---------------------------------------------------------------------------

    \91\ See letter from ABA Pre-Proposal recommending that the 
Commission provide ``that the safe harbor(s) is not the exclusive 
means by which an issuer may comply with the `compensatory plan 
carve-out' provisions of Section 12(g)(5).'' This commenter 
suggested that ``failure to satisfy all conditions to reliance on 
the safe harbor(s) should not preclude reliance on the statutory 
carve-out itself.''
    \92\ See letter from ABA Pre-Proposal.
---------------------------------------------------------------------------

1. Proposed Rule Amendment
    We proposed a non-exclusive safe harbor that would provide that a 
person will be deemed to have received the securities pursuant to an 
employee compensation plan if such person received them pursuant to a 
compensatory benefit plan in transactions that met the conditions of 
Securities Act Rule 701(c).
2. Comments on Proposed Rule Amendment
    We received comments on the proposed amendment from two commenters, 
both generally supporting the amendment.\93\ One commenter, while 
generally supportive of the rule and safe harbor, expressed concern 
that an issuer's ability to rely on the safe harbor was conditioned on 
the issuer's ability to demonstrate compliance with all of the express 
requirements of an exemption, placing undue emphasis on technical 
aspects of the exemption that should not serve as the basis for 
determining whether an issuer should be required to register under 
Section 12(g).\94\ This commenter suggested that Section 503 of the 
JOBS Act should be read to mandate that the safe harbor provide 
certainty with respect to the exempt offering condition of JOBS Act 
Section 502 and that if the safe harbor requires an issuer to establish 
annually that each issuance of exempt equity securities satisfied an 
available Securities Act exemption, then the safe harbor would impose a 
significant ongoing burden on the issuer. The commenter recommended 
revising the safe harbor so that, solely for purposes of Exchange Act 
Section 12(g), the original issuance would be deemed to have satisfied 
the Securities Act exemption condition if the conditions of Securities 
Act Rule 701(c) are satisfied at the end of the fiscal year.\95\
---------------------------------------------------------------------------

    \93\ See letters from ABA and ADISA.
    \94\ See letter from ABA.
    \95\ Id.
---------------------------------------------------------------------------

    Two commenters made recommendations that the Commission provide 
more guidance on the application of Securities Act Rule 701(c), or 
modify the application of Rule 701(c) in the Section 12(g) context.\96\ 
One commenter recommended that there be no limit on the categories of 
persons who may receive securities pursuant to an employee compensation 
plan for purposes of the safe harbor.\97\ Another commenter recommended 
expanding the provisions of Securities Act Rule 701(c) to exempt any 
consultants and advisors, instead of maintaining the limitation in Rule 
701(c) to consultants and advisors who are natural persons.\98\ This 
commenter also recommended that the Commission explicitly provide that 
Rule 701(c) extends to family members who acquire equity securities 
initially issued pursuant to a compensatory benefit plan from an 
employee (or former employee) by gift or domestic relations order, or 
upon an employee's death or disability, as well as to the executor or 
guardian of the employee, former employee, or family member who 
acquires the securities upon such person's death or disability.
---------------------------------------------------------------------------

    \96\ See letters from ABA and ADISA.
    \97\ See letter from ADISA.
    \98\ See letter from ABA.
---------------------------------------------------------------------------

3. Final Rule Amendment and Interpretation
    After considering the comments, we are adopting the proposed 
amendment to Exchange Act Rule 12g5-1(a)(8) with the additions and 
clarifications detailed below. We are adopting a non-exclusive safe 
harbor.\99\ The safe harbor provides that:
---------------------------------------------------------------------------

    \99\ Failure to satisfy all of the conditions of the non-
exclusive safe harbor would not preclude reliance on Section 
12(g)(5) or other provisions of the rule.
---------------------------------------------------------------------------

     an issuer may deem a person to have received the 
securities pursuant to an employee compensation plan if such plan and 
the person who received the securities pursuant to the plan met the 
plan and participant conditions of Securities Act Rule 701(c); and
     an issuer may, solely for the purposes of Section 12(g), 
deem the securities to have been issued in a transaction exempt from, 
or not subject to, the registration requirements of Section 5 of the 
Securities Act if the issuer had a reasonable belief at the time of the 
issuance that the securities were issued in such a transaction.
a. Employee Compensation Plan
    We believe that using the conditions of Rule 701(c) to structure 
the employee compensation plan safe harbor for the determination that a 
person received the securities pursuant to an employee compensation 
plan allows issuers to apply well understood principles of an existing 
Securities Act exemption to the new Exchange Act registration 
determination created by the JOBS Act. We believe application in a 
Section 12(g) context of the familiar concepts applied in connection 
with the issuance of compensatory equity securities under Securities 
Act Rule 701 will facilitate compliance and simplify recordkeeping.
    Rule 701 exempts from Securities Act registration offers and sales 
of securities pursuant to certain compensatory benefit plans and 
contracts relating to compensation. Rule 701(c) limits this exemption 
to offers and sales of securities under a written compensatory benefit 
plan established by the issuer, its parents, its majority-owned 
subsidiaries or majority-owned subsidiaries of the issuer's parent, for 
the participation of their employees, directors, general partners, 
trustees, officers, or consultants and advisors.\100\

[[Page 28697]]

Rule 701(c)(1) sets forth special requirements for consultants and 
advisors \101\ and Rule 701(c)(3) defines eligible family members.\102\
---------------------------------------------------------------------------

    \100\ Securities Act Rule 701(c) exempts offers and sales of 
securities (including plan interests and guarantees pursuant to Rule 
701(d)(2)(ii)) under a written compensatory benefit plan (or written 
compensation contract) established by the issuer, its parents, its 
majority-owned subsidiaries or majority-owned subsidiaries of the 
issuer's parent, for the participation of their employees, 
directors, general partners, trustees (where the issuer is a 
business trust), officers, or consultants and advisors, and their 
family members who acquire such securities from such persons through 
gifts or domestic relations orders. This section exempts offers and 
sales to former employees, directors, general partners, trustees, 
officers, consultants and advisors only if such persons were 
employed by or providing services to the issuer at the time the 
securities were offered. In addition, the term ``employee'' includes 
insurance agents who are exclusive agents of the issuer, its 
subsidiaries or parents, or who derive more than 50% of their annual 
income from those entities. As explained in the 1999 Rule 701 
Release at Section II.D, Rule 701 is also available to persons with 
a de facto employment relationship with the issuer. Such a 
relationship would exist where a person not employed by the issuer 
provides the issuer services that traditionally are performed by an 
employee and the compensation paid for those services is the primary 
source of the person's earned income.
    \101\ The Commission adopted amendments to Form S-8 and the Rule 
405 definition of ``employee benefit plan'' that made Form S-8 
available for the issuance of securities to consultants or advisors 
only if: They are natural persons; they provide bona fide services 
to the registrant; and the services are not in connection with the 
offer or sale of securities in a capital-raising transaction, and do 
not directly or indirectly promote or maintain a market for the 
registrant's securities. See 1999 Form S-8 Release and 1999 Rule 701 
Release. Rule 701(c)(1) applies the same limitations regarding 
consultants and advisors as those provided in Form S-8 and the Rule 
405 definition of ``employee benefit plan.''
    \102\ Rule 701 is available for the exercise of employee benefit 
plan options by an employee's family member who has acquired the 
options from the employee through a gift or a domestic relations 
order. As defined in Exchange Act Rule 701(c)(3) [17 CFR 
230.701(c)(3)], for this purpose, ``family member'' includes any 
child, stepchild, grandchild, parent, stepparent, grandparent, 
spouse, former spouse, sibling, niece, nephew, mother-in-law, 
father-in-law, son-in-law, daughter-in-law, brother-in-law, or 
sister-in-law, including adoptive relationships, any person sharing 
the employee's household (other than a tenant or employee), a trust 
in which these persons have more than 50% of the beneficial 
interest, a foundation in which these persons (or the employee) 
control the management of assets, and any other entity in which 
these persons (or the employee) own more than 50% of the voting 
interests.
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    The safe harbor we are adopting today is available for the plan 
participants enumerated in Rule 701(c), including employees, directors, 
general partners, trustees, officers and certain consultants and 
advisors.\103\ The safe harbor also is available for permitted family 
member transferees with respect to securities issued pursuant to a plan 
that are acquired by gift or domestic relations order from plan 
participants, or such securities acquired by permitted family member 
transferees in connection with options transferred to them by the plan 
participant through gifts or domestic relations orders.\104\ Because 
the safe harbor is limited to holders who are persons specified in Rule 
701(c), once these persons subsequently transfer the securities to 
holders not specified in Rule 701(c), whether or not for value, the 
securities must be counted as held of record by the transferee for 
purposes of determining whether the issuer is subject to the 
registration and reporting requirements of Exchange Act Section 
12(g)(1).
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    \103\ Unlike traditional employees, consultants and advisors 
typically provide their services to multiple clients rather than to 
the same issuer on a dedicated basis. This distinction may cause 
them to be less likely to hold the securities they receive as 
compensation and more likely to sell them. As a result the 
Commission limited the consultants and advisors eligible to rely on 
the exemption. See 1999 Rule 701 Release at Section II.D. We believe 
that in light of the Rule 701 restrictions applicable to consultants 
and advisors, the compensatory nature of the transactions justifies 
treating consultants and advisors who are eligible to receive 
securities in compensatory transactions that satisfy the conditions 
of Rule 701(c) as persons who receive securities pursuant to an 
employee compensation plan for purposes of the Rule 12g5-1 safe 
harbor. Furthermore, since the securities would no longer be 
eligible for the exclusion under the safe harbor following their 
transfer, we believe the potential for abuse would be limited. 
However, in spite of one commenter's recommendation (see letter from 
ABA), we see no reason to expand the scope of eligible consultants 
and advisors under Section 12(g) or Rule 701, which the Commission 
narrowed in 1999 in order to address abuses in the use of Form S-8 
and Rule 701. See Registration of Securities on Form S-8, Release 
No. 33-7646 (Feb. 25, 1999) [64 FR 11103 (Mar. 8, 1999)]; Rule 701--
Exempt Offerings Pursuant to Compensatory Arrangements, Release No. 
33-7645 (Feb 25, 1999) [64 FR 11095 (Mar. 8, 1999)].
    \104\ See Rule 701--Exempt Offerings Pursuant to Compensatory 
Arrangements, Release No. 33-7511 (Feb. 27, 1998) [63 FR 10785 (Mar. 
5, 1998)] at Section III.E.4. Including family member transferees in 
the safe harbor is consistent with the approach in Rule 701(c), 
which provides an exemption to family member transferees in 
connection with stock options because of their common economic 
interest and the non-capital raising nature of the transactions.
---------------------------------------------------------------------------

    An issuer may rely on the safe harbor when determining the holders 
of securities issued in reliance on Securities Act Rule 701, as well as 
holders of securities issued in transactions otherwise exempted from, 
or not subject to, the registration requirements of the Securities Act 
that satisfy the conditions of Rule 701(c), even if all the other 
conditions of Rule 701, such as issuer eligibility in Rule 701(b)(1), 
the volume limitations in Rule 701(d) or the disclosure delivery 
provisions in Rule 701(e), are not met. Thus, the safe harbor is 
available for holders of securities received in other employee 
compensation plan transactions exempted from, or not subject to, the 
registration requirements of Section 5 of the Securities Act, such as 
securities issued in reliance on Securities Act Section 4(a)(2), 
Regulation A, Regulation D, or Regulation S under the Securities Act, 
that also meet the conditions of Rule 701(c).
b. Securities Issued in Exempt Transactions
    In response to comments, we are adding a provision to the safe 
harbor relating to the determination that the securities were issued in 
a transaction exempt from, or not subject to, the registration 
requirements of Section 5 of the Securities Act. The addition to the 
safe harbor provides that, solely for purposes of Section 12(g) of the 
Exchange Act, an issuer may deem securities to have been exempt from, 
or not subject to, the registration requirements of Section 5 of the 
Securities Act if the issuer had a reasonable belief at the time of 
issuance that the securities were issued in a transaction that was 
exempt from, or not subject to, the registration requirements of 
Section 5.
    While one commenter recommended that the safe harbor should deem 
the securities qualified for the Securities Act exemption if the 
conditions of Securities Act Rule 701(c) were met as of the end of the 
fiscal year,\105\ we believe that such a safe harbor would go too far 
and negate the requirement that the securities have been issued in a 
transaction exempt from, or not subject to, the registration 
requirements of Section 5 of the Securities Act at the time of 
issuance. Instead, the safe harbor provides issuers with relief from 
the burden of establishing that earlier issuances of securities 
satisfied an appropriate exemption on an annual basis provided it had a 
reasonable belief that it had complied with the appropriate 
registration requirements or the conditions of an applicable exemption 
at the time of issuance.
---------------------------------------------------------------------------

    \105\ See letter from ABA.
---------------------------------------------------------------------------

c. Interpretative Guidance Relating to Acquisitions by Family Members
    One commenter recommended that the Commission provide guidance 
regarding the application of Rule 701 to certain equity securities 
initially issued pursuant to a compensatory benefit plan acquired from 
an employee (or former employee) by gift or domestic relations order, 
or upon an employee's (or former employee's) death or disability.\106\ 
In light of the nature of such transactions, family members (as defined 
in Rule 701(c)) who receive the equity securities as a result of the 
employee's (or former employee's) gift, domestic relations order, or 
death are also considered as persons who received ``the securities 
pursuant to an employee compensation plan'' for purposes of Rule 12g5-
1(a)(8).\107\
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    \106\ See letter from ABA.
    \107\ In general we understand that guardians or members of a 
committee for incompetent former employees, or similar persons duly 
authorized by law to administer the assets of former employees would 
administer the assets for the benefit of the former employee and 
title would not have transferred to these agents. In such 
circumstances, the securities would meet the conditions of Rule 
701(c) for purposes of determining the holders of record.
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D. Foreign Private Issuers

1. Proposed Rule Amendments
    While ``foreign private issuers'' \108\ would be able to rely on 
Exchange Act

[[Page 28698]]

Rule 12g5-1(a)(8) when making their determination of the number of U.S. 
resident holders under Exchange Act Rule 12g3-2(a), we proposed to 
amend Exchange Act Rule 3b-4 to clarify that securities held by 
employees must continue to be counted for the purpose of determining 
the percentage of the issuer's outstanding securities held by U.S. 
residents, and thus for determining whether an issuer qualifies as a 
foreign private issuer. We also proposed to amend the definition of 
``foreign private issuer'' under Securities Act Rule 405 to reinsert an 
omitted instruction but with a proposed revision, identical to that 
proposed under Exchange Act Rule 3b-4, clarifying that securities held 
by employees must continue to be counted for the purposes of 
determining the percentage of the issuer's outstanding securities held 
by U.S. residents and foreign private issuer status under the 
Securities Act.\109\
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    \108\ See Exchange Act Rule 3b-4(c) [17 CFR 240.3b-4(c)]. A 
foreign private issuer is any foreign issuer other than a foreign 
government, except for an issuer that (1) has more than 50% of its 
outstanding voting securities held of record by U.S. residents and 
(2) any of the following: (i) A majority of its officers and 
directors are citizens or residents of the United States; (ii) more 
than 50% of its assets are located in the United States; or (iii) 
its business is principally administered in the United States.
    \109\ 17 CFR 230.405. The definition of ``foreign private 
issuer'' under the Securities Act is intended to be the same as the 
definition under Exchange Act Rule 3b-4.
---------------------------------------------------------------------------

2. Comments on Proposed Rule Amendments
    We received comments on the proposed amendments from one commenter, 
who supported the proposed amendments relating to foreign private 
issuers.\110\
---------------------------------------------------------------------------

    \110\ See letter from ABA.
---------------------------------------------------------------------------

3. Final Rule Amendments
    After considering the comments, we are adopting the amendments 
substantially as proposed. Under the rules we are adopting, foreign 
private issuers may rely on Rule 12g5-1(a)(8) when making their 
determination of the number of U.S. resident holders under Exchange Act 
Rule 12g3-2(a).\111\ Under Rule 12g3-2(a), foreign private issuers that 
meet the asset and shareholder threshold for registration under Section 
12(g) are exempt from registering any class of securities under that 
section if the class of securities is held by fewer than 300 holders 
resident in the United States.\112\ For purposes of determining whether 
this threshold is met, Rule 12g3-2(a)(1) specifies that the method 
shall be as provided in Exchange Act Rule 12g5-1, except that 
securities held of record by brokers, dealers, banks and nominees for 
the accounts of customers resident in the United States shall be 
counted as held by the number of separate accounts for which the 
securities are held.\113\ Because the rule directs issuers to the 
definition of ``held of record'' in Rule 12g5-1, the statutory changes 
to Section 12(g)(5) as well as the amendment to Rule 12g5-1 adopted 
today also apply to the determination of a foreign private issuer's 
U.S. resident holders for the purposes of the Rule 12g3-2(a) 
analysis.\114\
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    \111\ 17 CFR 240.12g3-2(a).
    \112\ Id.
    \113\ The amendment to Rule 12g5-1 is limited to determinations 
under Section 12(g). The definition of ``foreign private issuer'' in 
Exchange Act Rule 3b-4 contains a cross-reference to Rule 12g3-2(a) 
for purposes of calculating record ownership in determining whether 
more than 50% of an issuer's outstanding voting securities are 
directly or indirectly held by residents of the United States. In 
contrast to the approach in Rule 12g3-2(a), Rule 3b-4 clarifies that 
securities held by employees must continue to be counted for the 
purpose of determining the percentage of the issuer's outstanding 
securities held by U.S. residents, and thus for determining whether 
an issuer qualifies as a foreign private issuer. See Instruction to 
paragraph (c)(1) of Rule 3b-4. We are revising the Instruction to 
paragraph (c)(1)A.2. from the proposal to clarify that all of Rule 
12g5-1(a)(8) does not apply for purposes of making a determination 
under Rule 405 as to foreign private issuer status.
    \114\ The definition of ``foreign private issuer'' under the 
Securities Act, which is found in Securities Act Rule 405, is the 
same as the definition under Exchange Act Rule 3b-4. We are 
similarly amending the foreign private issuer definition under Rule 
405 to reinsert an omitted instruction with an identical revision to 
that in Rule 3b-4, clarifying that securities held by employees must 
continue to be counted for the purposes of determining the 
percentage of the issuer's outstanding securities held by U.S. 
residents and foreign private issuer status under the Securities 
Act.
---------------------------------------------------------------------------

IV. Economic Analysis

    Title V and Title VI of the JOBS Act increased the registration 
thresholds for issuers, amended the definition of ``held of record'' to 
exclude securities issued pursuant to employee compensation plans and 
increased the thresholds for termination of registration and suspension 
of reporting under the Exchange Act for banks and bank holding 
companies. The FAST Act similarly increased the thresholds for 
registration, termination of registration and suspension of reporting 
under the Exchange Act for savings and loan holding companies. The 
Commission is adopting amendments to implement Title V and Title VI of 
the JOBS Act and Title LXXXV of the FAST Act.
    In adopting rules or amendments, we are mindful of the costs 
imposed by and the benefits obtained from our rules. The discussion 
below attempts to address the economic effects of the amendments, 
including the likely costs and benefits of the amendments as well as 
the effect of the amendments on efficiency, competition and capital 
formation.\115\ Some of the costs and benefits stem from the statutory 
mandates of Title V and Title VI of the JOBS Act and Title LXXXV of the 
FAST Act, while others are affected by the discretion we exercise in 
revising our rules to reflect this mandate. For purposes of this 
economic analysis, we address the benefits and costs resulting from the 
mandatory statutory provisions and our exercise of discretion together 
because the two types of costs and benefits are not readily separable. 
We also analyze the benefits and costs of significant alternatives to 
the amendments that were suggested by commenters and that we considered 
on our own accord.
---------------------------------------------------------------------------

    \115\ Section 23(a)(2) of the Exchange Act [17 U.S.C. 78w(a)(2)] 
requires the Commission, when making rules under the Exchange Act, 
to consider the impact that the rules would have on competition, and 
prohibits the Commission from adopting any rule that would impose a 
burden on competition not necessary or appropriate in furtherance of 
the Exchange Act. 15 U.S.C. 78w(a). Further, Section 2(b) of the 
Securities Act [15 U.S.C. 77b(b)] and Section 3(f) of the Exchange 
Act [17 U.S.C. 78c(f)] require 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.
---------------------------------------------------------------------------

A. Baseline

    The baseline for our economic analysis of the amendments, including 
the baseline for our consideration of the effects on efficiency, 
competition and capital formation, is the state of the market as well 
as market practices prior to enactment of the JOBS Act and the FAST 
Act. Prior to the JOBS Act, issuers were required to register a class 
of their equity securities with the Commission upon reaching 500 
holders of record and total assets of $10 million \116\ and were 
allowed to terminate registration or suspend the duty to file periodic 
and current reports with the Commission when the number of holders of 
record had fallen below 300, or below 500 and total assets had not 
exceeded $10 million on the last day of each of the issuer's three most 
recent fiscal years. In addition, Exchange Act Rules 12h-1(f) and 12h-
1(g) permitted issuers to exclude stock options issued under written 
compensatory benefit plans under certain conditions from the 
registration requirements of Section 12(g).
---------------------------------------------------------------------------

    \116\ See supra note 31.
---------------------------------------------------------------------------

    The JOBS Act raised the thresholds at which an issuer is required 
to register a class of equity securities with the Commission pursuant 
to Section 12(g) and provided that persons holding certain employee 
compensation plan

[[Page 28699]]

securities need not be counted when determining whether an issuer is 
required to register. The JOBS Act also raised the thresholds at which 
an issuer that is either a bank or a bank holding company is permitted 
to terminate registration or suspend reporting obligations with the 
Commission. These statutory changes were effective immediately upon 
signing of the JOBS Act. As a result, some banks and bank holding 
companies were newly eligible to terminate registration or suspend 
reporting. As of December 31, 2015, we estimate that approximately 103 
such institutions have elected to do so.\117\ We estimate that there 
are approximately 486 banks and bank holding companies that currently 
report to the Commission,\118\ of which some may be eligible to 
terminate registration under the JOBS Act but have elected to continue 
reporting.
---------------------------------------------------------------------------

    \117\ The Commission staff derived this estimate of the number 
of banks and bank holding companies that have elected to terminate 
registration or suspend reporting by analyzing Form 15 filings on 
EDGAR.
    \118\ The Commission staff derived this estimate by analyzing 
annual filings submitted to the Commission as of December 31, 2015 
for the most recently completed fiscal year.
---------------------------------------------------------------------------

    Subsequent to the JOBS Act, the FAST Act raised the thresholds at 
which savings and loan holding companies are required to register and 
permitted to terminate registration or suspend reporting obligations to 
the same thresholds as apply to banks and bank holding companies. These 
statutory changes were effective immediately upon signing of the FAST 
Act. We estimate that, as of December 31, 2015, there are approximately 
64 savings and loan holding companies that currently report to the 
Commission, approximately 28 of which are eligible to terminate 
registration or suspend reporting under the amendments.\119\
---------------------------------------------------------------------------

    \119\ Id. We note, however, that 25 of these 28 savings and loan 
holding companies are listed on a national securities exchange and 
required to report under Section 12(b) of the Exchange Act. In order 
to cease reporting, these issuers would be required to delist from 
the exchange.
---------------------------------------------------------------------------

    We are amending specified Exchange Act rules to reflect the new, 
higher threshold for banks, savings and loan holding companies and bank 
holding companies under Section 12(g)(4) and Section 15(d)(1). For 
those banks, savings and loan holding companies and bank holding 
companies that are eligible to terminate registration under Section 
12(g), the amendments will provide the same procedural accommodations 
available to other issuers under current rules by permitting these 
institutions to suspend their reporting obligations immediately upon 
the filing of a certification on Form 15 with the Commission.
    In addition, the amendments apply the definition of ``accredited 
investor'' in Securities Act Rule 501(a) in making determinations under 
Exchange Act Section 12(g)(1), revise the definition of ``held of 
record'' in Rule 12g5-1, and establish a non-exclusive safe harbor for 
issuers to rely on when determining whether securities were received 
pursuant to an employee compensation plan in transactions exempt from, 
or not subject to, the registration requirements of Section 5 of the 
Securities Act. The non-exclusive safe harbor, as adopted, permits an 
issuer to rely on the definition of ``compensatory benefit plan'' in 
Securities Act Rule 701 and the conditions in Securities Act Rule 
701(c) in determining whether a person has received securities pursuant 
to an employee compensation plan. It also permits an issuer to rely on 
a reasonable belief at the time of issuance that the securities were 
issued in a transaction exempt from, or not subject to, the 
registration requirements of Section 5.
    We considered alternative definitions of ``employee compensation 
plan.'' We also considered whether to provide additional guidance with 
respect to the determination of accredited investor status when 
establishing the number of holders of record. These decisions may 
affect how a non-reporting issuer counts its holders of record for the 
purpose of the registration thresholds under the Exchange Act; hence, 
they could affect whether an issuer becomes subject to Exchange Act 
reporting. However, due to limited availability of shareholder 
information on these non-reporting issuers, we are unable to quantify 
the number of non-reporting issuers that might be affected by these 
decisions.

B. Analysis of the Amendments

    The amendments will affect reporting issuers generally, and banks, 
bank holding companies and savings and loan holding companies 
specifically, as well as non-reporting issuers, employees and other 
investors. We analyze the costs and benefits associated with the 
amendments below.
1. Increased Regulatory Thresholds for Banks, Savings and Loan Holding 
Companies and Bank Holding Companies
    As discussed above, the JOBS Act and the FAST Act amended Sections 
12(g) and 15(d) of the Exchange Act to raise the thresholds at which 
banks, savings and loan holding companies and bank holding companies 
may terminate registration or suspend their obligations to file reports 
with the Commission from 300 to 1,200 holders of record.\120\ However, 
without the amendments being adopted today, banks, savings and loan 
holding companies and bank holding companies that want to use the 
higher thresholds must wait 90 days after filing a certification with 
the Commission that the number of holders of record is less than 1,200 
persons to terminate their Section 12(g) registration and cease filing 
reports required by Section 13(a) and must wait until the first day of 
the fiscal year to suspend any Section 15(d) reporting obligations. For 
other issuers, our existing rules afford procedural accommodations that 
allow them to suspend their reporting obligations immediately upon the 
filing of a certification on Form 15.
---------------------------------------------------------------------------

    \120\ For other issuers, the threshold in Section 12(g)(4) for 
termination of registration and in Section 15(d)(1) for suspension 
of reporting remains at 300 holders of record.
---------------------------------------------------------------------------

    To make these procedural accommodations applicable to banks, 
savings and loan holding companies and bank holding companies, as 
proposed, the amendments revise Exchange Act Rules 12g-2, 12g-3, 12g-4 
and 12h-3 to reflect the 1,200 holders of record threshold for banks, 
savings and loan holding companies and bank holding companies. This 
will permit banks, savings and loan holding companies and bank holding 
companies to rely on these rules to cease reporting during a fiscal 
year, rather than wait the 90 days or until the end of the reporting 
year prescribed under the Exchange Act. This will reduce issuer 
compliance and reporting costs during the fiscal year the issuer ceases 
reporting \121\ and may lessen potential confusion that could arise 
from the differences in the thresholds contained in the statute and our 
existing rules. At the same time, extending these procedural 
accommodations could accelerate the loss of investor access to current 
information about the issuer. We note, however that this effect is 
likely mitigated by the non-SEC regulatory disclosure requirements that 
will continue to apply to regulated banks, savings and loan holding 
companies and bank holding companies after adoption of today's 
amendments.
---------------------------------------------------------------------------

    \121\ See letter from ABA indicating that these costs could be 
especially onerous for financially distressed firms and from ICBA.
---------------------------------------------------------------------------

    We believe that the amendments adopted under this rule will not 
have a significant impact on competition. To the extent that savings 
pursuant to lower compliance and reporting costs could possibly be used 
to increase institutions' lending activities, the amendments may lead 
to higher levels

[[Page 28700]]

of investment and capital formation in the economy.
    As stated above, we estimate that there are approximately 550 
banks, savings and loan holding companies and bank holding companies 
that currently report with the Commission. Many of these reporting 
issuers have more than 1,200 holders of record and are not eligible to 
cease reporting under the new higher thresholds. However, approximately 
192 of these reporting banks, savings and loan holding companies and 
bank holding companies have between 300 and 1,199 holders of record and 
may be eligible to cease reporting. Many of these banks and bank 
holding companies have likely been eligible to deregister or suspend 
reporting since the adoption of the JOBS Act, but have chosen to 
continue as reporting issuers. One explanation for why many of these 
issuers have chosen not to deregister is that most (143) are also 
listed on national securities exchanges and if they chose to deregister 
or suspend reporting under the Exchange Act, they would have to give up 
their national exchange listing.\122\ While a higher percentage of 
savings and loan holding companies have become eligible to terminate 
their registration or suspend reporting under the FAST Act, 
approximately 50 of 64 reporting savings and loan holding companies are 
registered pursuant to Section 12(b). Based on staff research, most of 
the newly eligible savings and loan holding companies (approximately 25 
of the 28) would have to delist from a national securities exchange to 
cease reporting under the Exchange Act.
---------------------------------------------------------------------------

    \122\ Listing on a national securities exchange triggers current 
and periodic Exchange Act reporting requirements under Section 
12(b).
---------------------------------------------------------------------------

    We believe that the likelihood of large numbers of eligible banks, 
savings and loan holding companies and bank holding companies 
terminating registration or suspending reporting based on the new 
higher thresholds in future years is low. While a relatively larger 
number of banks and bank holding companies (69) relied on the new 
thresholds to exit Exchange Act reporting immediately after the 
adoption of the JOBS Act in 2012, the numbers of such issuers relying 
on the new thresholds to exit substantially decreased over the 
subsequent three years (18 in 2013, 7 in 2014 and 6 in 2015).\123\ As 
banks and bank holding companies remain subject to other regulatory 
reporting requirements,\124\ many have chosen to continue reporting, 
and bear ongoing reporting costs, even though they are eligible to 
cease reporting under Section 12(g) of the Exchange Act. We expect to 
see a similar trend with respect to the deregistrations of savings and 
loan holding companies.
---------------------------------------------------------------------------

    \123\ The Commission staff derived this estimate by analyzing 
Form 15 filings submitted to the Commission. These numbers indicate 
that approximately 4%, 1% and 1% of the reporting bank and bank 
holding companies deregistered during 2013, 2014 and 2015, 
respectively.
    \124\ The Board of Governors of the Federal Reserve System is 
responsible for the consolidated supervision of bank holding 
companies and savings and loan holding companies and requires those 
entities to provide data relating to capitalization, liquidity, and 
risk management as well as periodic financial reports in order for 
the Board of Governors to analyze the overall financial condition of 
those entities to ensure safe and sound operations.
---------------------------------------------------------------------------

    In deciding whether to terminate registration or suspend their 
reporting obligations, we anticipate that banks, savings and loan 
holding companies and bank holding companies will weigh the benefits of 
being a public company against the burden of additional disclosure 
costs. Commonly cited benefits of being a public company include the 
ability to obtain a lower cost of capital for investment and growth, 
increased liquidity through a broader shareholder base, and greater 
ability to finance acquisitions and offer equity-based incentive 
contracts.\125\ Commonly cited costs of being a public company include 
the need to comply with increased regulations and regulatory 
supervision, including requirements for independent audits,\126\ 
disclosure of information to competitors, loss of control and ownership 
dilution.\127\
---------------------------------------------------------------------------

    \125\ See J. Brau, Why Do Firms Go Public?, Oxford Handbook of 
Entrepreneurial Finance (2010) (providing a general discussion of 
the different rationales for firms to go public); U. Celikyurt, M. 
Sevilir, and A. Shivdasani, Going Public to Acquire? The Acquisition 
Motive in IPOs, J. FIN. ECON. (2010) (arguing that firms go public 
so as to facilitate acquisitions); M. Pagano, F. Panetta, and L. 
Zingales, Why Do Companies Go Public? An Empirical Analysis, J. FIN. 
(1998) (showing that initial public offerings are generally followed 
by lower cost of credit and increased turnover in control); T. 
Chemmanur and P. Fulghieri, A Theory of the Going Public Decision, 
REV. FIN.STUD. (1999) (arguing that going public broadens the 
ownership base of the firm); R. Rosen, S. Smart and C. Zutter, Why 
Do Firms Go Public? Evidence From the Banking Industry, Working 
Paper (2005) (finding that banks that go public are more likely to 
grow faster, earn higher profits, employ more leverage and become 
acquirers when compared to their non-reporting counterparts), 
available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=686473.
    \126\ See letter from IPA. IPA cited an estimate of ongoing 
reporting costs under the Exchange Act of $650,000 annually. This 
commenter additionally noted that becoming an Exchange Act reporting 
company may be contrary to an issuer's business plan and against 
investors' economic interests. See also letter from ABA positing 
that once the initial cost of implementing reporting procedures are 
undertaken, the ongoing costs of reporting are not a significant 
burden on capital formation and job creation.
    \127\ See J. Brau and S. Fawcett, Initial Public Offerings: An 
Analysis of Theory and Practice, J. FIN. (2006) (reporting based on 
a survey of CFOs that ``desire to maintain decision-making 
control,'' ``disclosing information to competitors,'' ``SEC 
reporting requirements'' and ``to avoid ownership dilution'' are 
among the top five reasons why firms choose to stay private); J. 
Farre-Mensa, Why Are Most Firms Privately Held?, Working paper, 
Harvard University (2011) (documenting that firms in industries with 
high disclosure costs (i.e., where it is easier for competitors to 
appropriate a firm's intellectual property) tend to remain private), 
available at http://www.cemfi.es/ftp/pdf/papers/wshop/Farre-Mensa_JobMarketPaper.pdf.
---------------------------------------------------------------------------

2. Use of the Term ``Accredited Investor'' in Exchange Act Section 
12(g)
    Section 501 of the JOBS Act raises the number of holders of record 
at which an issuer is required to register a class of equity securities 
under the Exchange Act from 500 persons to 2,000 persons or 500 persons 
who are not accredited investors. In order for an issuer to rely on the 
new, higher threshold established by the JOBS Act, the issuer must make 
accredited investor determinations if it has more than 500 holders of 
record.
    We are amending Exchange Act Rule 12g-1 to clarify that the 
definition of ``accredited investor'' in Securities Act Rule 501(a) 
applies when making determinations under Exchange Act Section 12(g)(1) 
and that such determination must be made as of the last day of the 
fiscal year rather than at the time of sale of the securities. Under 
Rule 501(a), an accredited investor is any person who comes within one 
or more of the categories of investors specified therein, or who the 
issuer reasonably believes comes within any such category. Many issuers 
and investors are familiar with the Rule 501(a) definition as it is a 
central component for private offerings conducted under Securities Act 
Rule 506 of Regulation D.\128\ Consequently, the amendment should 
facilitate compliance.\129\ Developing an alternative definition for 
purposes of Section 12(g)(1) could impose costs on issuers and 
investors by requiring them to familiarize themselves with, and apply, 
a new and different standard.\130\ Due to limitations in available 
data, we are unable to estimate how many issuers will be impacted by 
using the Rule 501(a) definition of ``accredited investor.''
---------------------------------------------------------------------------

    \128\ The Rule 501(a) definition is also used in connection with 
other unregistered offerings, for example for offerings conducted 
pursuant to amended Regulation A or the recently adopted Regulation 
Crowdfunding.
    \129\ See letter from ABA.
    \130\ Id.
---------------------------------------------------------------------------

    Requiring issuers to make the accredited investor determination at 
the end of the fiscal year rather than at the time of sale of 
securities will ensure that the information is timely and consistent

[[Page 28701]]

with issuers' facts and circumstances at the end of each year. 
Permitting an issuer to rely on an ongoing basis on information 
previously obtained relating to accredited investors status, such as 
allowing reliance on information obtained by the issuer at the time the 
securities were initially issued to the investor or at the time the 
securities were most recently issued to the investor, would likely be 
less costly than requiring the issuer to establish a reasonable belief 
that the investor is an accredited investor. This, however, could also 
lead to reliance on outdated information, potentially causing issuers 
with more than 500 non-accredited investors to fail to register, 
thereby leaving investors in those issuers with less information and 
protection under the federal securities laws.
    Not providing specific guidance or rules on how to establish a 
reasonable belief of a security holder's status as an accredited 
investor for purposes of determining holders of record could result in 
some uncertainty and possibly higher costs for issuers. We believe, 
however, that the ``reasonable belief'' standard under Rule 501(a) 
provides issuers with appropriate flexibility to use the method that 
works best, given their individual circumstances, to determine the 
accredited investor status of their shareholders. We also believe that 
this standard may help to mitigate some of the concerns relating to 
higher costs under the adopted provision by allowing issuers to rely on 
previous/other determinations if they have a reasonable belief that the 
security holder continues to be or is an accredited investor. We also 
note that many issuers are familiar with and routinely use the 
``reasonable belief'' standard without such guidance when making 
private offerings in reliance on Regulation D.
    Some commenters recommended that the Commission address potential 
compliance issues related to the accredited investor threshold by 
providing a safe harbor for determining accredited investor 
status.\131\ A safe harbor could increase efficiency by providing 
issuers with a prescribed process to determine and update the 
accredited investor status of their investors. For example, a safe 
harbor that permits an issuer to rely on an annual affirmation of 
accredited investor status by the investor, other information obtained 
by the issuer or on a combination of a certification and other 
information may be less costly than requiring an issuer to establish a 
reasonable basis for its determination through other means. Similarly, 
a safe harbor with specified time limits on the permitted use of the 
information \132\ or conditioned upon the issuer not having information 
that the previously obtained information was incorrect, unreliable or 
had changed could address some of the concerns related to higher costs 
or outdated information. Another alternative would be a safe harbor 
that permits an issuer to rely on a third-party certification for 
determining the accredited investor status of investors.\133\
---------------------------------------------------------------------------

    \131\ See letters from ABA, Foley and NYCBA. See also letters 
from ADISA, CFM, Cleary and IPA.
    \132\ See letter from Cleary suggesting a safe harbor permitting 
accredited investor status determinations made in offerings during 
the three months prior to fiscal year-end or on self-certifications 
by investors if the offering occurred more than three months but 
less than twelve months prior to fiscal year-end.
    \133\ See letter from IPA suggesting that relying upon third 
parties might allow issuers to reduce the cost of compliance for 
accredited investor determinations. We do not have adequate 
information about third-party certification providers and the 
characteristics of this industry to assess this alternative in terms 
of reliability and cost of the provided certification services. To 
the extent that reputational concerns would incentivize third-party 
certification providers to perform reliable and updated due 
diligence, third-party certification could potentially provide 
accurate information at a cost that economies of scale may lessen.
---------------------------------------------------------------------------

    Despite the benefits described above, providing a specific method 
(or methods) under a safe harbor could become a de facto minimum 
standard which we believe would reduce the flexibility available to 
issuers for determining accredited investor status.\134\ Moreover, at-
least for some issuers, a prescribed method may be less accurate and 
more burdensome than alternate non-prescribed methods in establishing 
the accredited status of investors. For example, a safe harbor 
providing for annual certification could be costly and have adverse 
impacts on small issuers and their investors,\135\ discouraging 
accredited investors from investing in their securities, and leading to 
lower levels of investment.\136\
---------------------------------------------------------------------------

    \134\ See letter from ABA.
    \135\ See letter from IPA.
    \136\ See letter from CFM.
---------------------------------------------------------------------------

3. Definition of ``Held of Record'' and Safe Harbor for Employee 
Compensation Plan Securities
    Section 12(g)(5), as amended by Section 502 of the JOBS Act, 
excludes from the definition of ``held of record'' securities held by 
persons who received them pursuant to an employee compensation plan in 
transactions exempted from the registration requirements of Section 5 
of the Securities Act for purposes of determining whether an issuer is 
required to register a class of security pursuant to Section 
12(g)(1).\137\ Section 503 of the JOBS Act directs the Commission to 
adopt a safe harbor that issuers can use when making their holder of 
record determinations.
---------------------------------------------------------------------------

    \137\ Prior to the JOBS Act, employees who obtained securities 
under an issuer's employee compensation plan were not excluded from 
the shareholders of record calculation.
---------------------------------------------------------------------------

    We believe that, by making it easier for non-reporting companies 
that issue securities to their employees to remain below the 
registration and reporting thresholds in the Exchange Act, the 
statutory changes will benefit issuers by allowing them to better 
control how and when they become subject to reporting requirements, 
while continuing to use securities to compensate employees.\138\ These 
changes could be particularly beneficial for smaller or cash-
constrained issuers that could more easily issue securities to their 
employees as a form of compensation without being subject to Exchange 
Act reporting requirements and the associated compliance costs.
---------------------------------------------------------------------------

    \138\ See letter from ABA.
---------------------------------------------------------------------------

    However, investors in these issuers, including employees, may be 
adversely affected by a delay in the potential registration of a class 
of securities and the associated reporting because they otherwise might 
benefit from the information provided through such reporting. As a 
result, the amendments to the definition of ``held of record'' and the 
non-exclusive safe harbor being adopted today could have an impact on 
the potential costs and benefits of Exchange Act registration for 
affected issuers and their investors by affecting areas such as the 
ease of relying upon the statutory exemption under Section 12(g), the 
number of non-reporting companies able to forestall registration, and 
the amount of information available to investors in those issuers' 
securities, with effects, for example, on price efficiency and 
liquidity. We further discuss the economic impact of specific aspects 
of these amendments below.
    Instead of establishing a new definition for the term ``employee 
compensation plan,'' we are amending the definition of ``held of 
record'' to permit an issuer to exclude securities held by persons who 
received them pursuant to an employee compensation plan in transactions 
exempted from, or not subject to, the registration requirements of 
Section 5 of the Securities Act and adopting a safe harbor providing 
that this condition will be satisfied if the securities were received 
pursuant to a compensatory benefit plan in transactions that meet

[[Page 28702]]

the conditions of Rule 701(c). By not creating a new definition and 
relying on familiar concepts, the amendments should facilitate 
compliance and simplify recordkeeping by issuers.\139\
---------------------------------------------------------------------------

    \139\ See letter from ABA.
---------------------------------------------------------------------------

    In a change from the proposal, we are revising the amendments to 
the definition of ``held of record'' to make clear that, in addition to 
securities issued to employees in transactions exempted from the 
registration requirements of Securities Act Section 5 (such as 
securities issued in a Rule 506 offering) or those issued to employees 
in transactions that did not involve a sale of securities within the 
meaning of Securities Act Section 2(a)(3), the amended definition also 
will permit issuers to exclude exempt securities issued to employees 
pursuant to Securities Act Section 3 (such as securities issued in a 
Regulation A or Rule 504 offering). The amendment will provide 
consistency in treatment of securities received pursuant to employee 
compensation plans in primary transactions that are exempt from Section 
5 registration requirements or not subject to Section 5 registration 
requirements.\140\ This could lower issuer costs and facilitate 
compliance. At the same time, such an expanded definition of ``held of 
record'' could reduce the number of holders of record of an issuer and 
potentially allow the issuers to delay or avoid Exchange Act reporting.
---------------------------------------------------------------------------

    \140\ Id.
---------------------------------------------------------------------------

    The amendments will permit issuers to exclude securities held by 
former employees who received the securities in a transaction exempt 
from, or not subject to, the registration requirements of Securities 
Act Section 5 in substitution or exchange for securities excludable 
under the proposed definition of held of record, as long as the former 
employees were eligible, at the time of issuance, to receive the 
original excludable securities. Relative to the proposal, the amended 
definition will also include such securities held by former employees 
who were employed by or providing services to a predecessor or an 
acquired company. By providing uniform treatment for all securities 
issued in exempt transactions, such provisions could lower issuer costs 
and facilitate compliance. Permitting exclusion of securities received 
by former employees and covered persons and securities exchanged or 
substituted for such original excludable securities also is likely to 
remove disincentives for issuers to engage in value-enhancing business 
combinations or other similar transactions,\141\ which will benefit 
issuers and their investors. In this way, the amendments may also lead 
to a more efficient allocation of resources amongst firms that could 
improve growth prospects over the longer run.
---------------------------------------------------------------------------

    \141\ Id.
---------------------------------------------------------------------------

    As proposed, the amendments establish a non-exclusive safe harbor 
that issuers can rely on when determining whether holders of securities 
received pursuant to an employee compensation plan may be excluded. 
Consistent with the proposal, the safe harbor being adopted relies on 
the conditions in existing Rule 701(c). Relying on an existing standard 
that is already understood by market participants will make it easier 
for issuers to avail themselves of this safe harbor than if we proposed 
a new alternative standard. While generally broad in application, the 
conditions in Rule 701(c) impose certain limitations, such as requiring 
that securities be sold under a compensatory benefit plan, that the 
plan be written, that the plan be established by the issuer or certain 
specified related entities and that participation be limited to 
employees and certain other specified persons. Although we are unable 
to quantify the impact of adopting this safe harbor, as we cannot 
reliably predict the number of issuers that would rely on it, we can 
qualitatively assess its impact. A safe harbor that applies the 
familiar concepts of existing Rule 701(c) should create efficiencies in 
its application and avoid conflicts with existing rules, which could 
reduce costs, especially for smaller issuers.\142\
---------------------------------------------------------------------------

    \142\ See letter from ABA which states that Rule 701 is the 
primary exemption relied upon by smaller and other non-reporting 
issuers for such transactions.
---------------------------------------------------------------------------

    In a change from the proposal, the safe harbor also includes a 
reasonable belief standard. The inclusion of such a standard will 
obviate the need for issuers to re-establish that earlier issuances 
satisfied an appropriate exemption at the time of issuance. This should 
provide greater regulatory certainty, leading to lower compliance 
burdens for issuers.\143\ Similarly, the interpretative guidance set 
forth in this release regarding transfers to family members of such 
exempt securities through the employee's death, disability or domestic 
relations order provides greater regulatory certainty with respect to 
specific circumstances that are unexpected or out of control of the 
issuer, which will benefit issuers intending to use equity 
compensation.\144\
---------------------------------------------------------------------------

    \143\ Id.
    \144\ Id.
---------------------------------------------------------------------------

    Finally, as proposed, the amendments also provide that foreign 
private issuers will be able to rely on the adopted safe harbor when 
making their determination of the number of U.S. resident holders under 
Exchange Act Rule 12g3-2(a). While we are unable to quantify the number 
of foreign private issuers that will be impacted due to limitations in 
the available data, the amendments may allow some foreign private 
issuers to delay registering with and reporting to the Commission. The 
cost and benefit tradeoffs of Exchange Act registration for foreign 
private issuers will be analogous to the ones discussed above for 
domestic issuers. Additionally, the flexibility accorded by the 
amendments will benefit the U.S.-based employees of foreign private 
issuers by putting them on equal footing with employees in domestic 
private companies.\145\
---------------------------------------------------------------------------

    \145\ Id.
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    Certain provisions of our disclosure rules and forms applicable to 
issuers contain ``collection of information'' requirements within the 
meaning of the Paperwork Reduction Act of 1995 (``PRA'').\146\ The 
hours and costs associated with preparing and filing forms and 
retaining records constitute reporting and cost burdens imposed by the 
collection of information requirements. 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 Office of 
Management and Budget (``OMB'') control number. Compliance with the 
information collections is mandatory. Responses to the information 
collections are not kept confidential and there is no mandatory 
retention period for the collections of information.
---------------------------------------------------------------------------

    \146\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The amendments adopted today do not alter the disclosure 
requirements set forth in our rules and forms; however, the JOBS Act 
and FAST Act amendments to Exchange Act Sections 12(g) and 15(d) and 
the amendments to our rules to reflect those statutory amendments are 
expected to insubstantially decrease the number of filings made 
pursuant to these rules and forms. Exchange Act Rules 12g-1, 12g-2, 
12g-3, 12g-4 and 12h-3 set forth when an issuer's securities are 
required to be registered and the procedures for a registrant to 
terminate its registration or suspend its duty to file reports. The 
amendments provide thresholds that issuers may rely on when determining 
their registration and reporting

[[Page 28703]]

obligations.\147\ Exchange Act Section 12(g)(5) and the amendment to 
Exchange Act Rule 12g5-1 also exclude securities received pursuant to 
certain employee compensation plans from the determination of when an 
issuer is required to initially register with the Commission. These 
changes will reduce the number of registrants required to initially 
register a class of securities with the Commission as well as 
accelerate the ability of some registrants to cease filing after they 
have crossed below the statutory thresholds. For purposes of the PRA, 
as discussed below, we estimate that the amendments will not 
substantially reduce the number of filings received, nor will they 
affect the incremental burden or cost per filing.
---------------------------------------------------------------------------

    \147\ We also are amending Rule 12g-1 to reflect the new higher 
thresholds in Section 12(g)(1).
---------------------------------------------------------------------------

    The titles for the affected collections of information are:
    (1) ``Form 10'' (OMB Control No. 3235-0064); \148\
---------------------------------------------------------------------------

    \148\ 17 CFR 249.10.
---------------------------------------------------------------------------

    (2) ``Form 20-F'' (OMB Control No. 3235-0288); \149\
---------------------------------------------------------------------------

    \149\ 17 CFR 249.220f.
---------------------------------------------------------------------------

    (3) ``Form 40-F'' (OMB Control No. 3235-0381); \150\
---------------------------------------------------------------------------

    \150\ 17 CFR 249.240f.
---------------------------------------------------------------------------

    (4) ``Form 10-K'' (OMB Control No. 3235-0063); \151\
---------------------------------------------------------------------------

    \151\ 17 CFR 249.310.
---------------------------------------------------------------------------

    (5) ``Form 10-Q'' (OMB Control No. 3235-0070); \152\
---------------------------------------------------------------------------

    \152\ 17 CFR 249.308a.
---------------------------------------------------------------------------

    (6) ``Form 8-K'' (OMB Control No. 3235-0060); \153\
---------------------------------------------------------------------------

    \153\ 17 CFR 249.308.
---------------------------------------------------------------------------

    (7) ``Schedule 14A'' (OMB Control No. 3235-0059); \154\
---------------------------------------------------------------------------

    \154\ 17 CFR 240.14a-101.
---------------------------------------------------------------------------

    (8) ``Schedule 14C'' (OMB Control No. 3235-0057); \155\ and
---------------------------------------------------------------------------

    \155\ 17 CFR 240.14c-101.
---------------------------------------------------------------------------

    (9) ``Form 15'' (OMB Control No. 3235-0167).

The forms were adopted under the Exchange Act and the Securities Act 
and set forth the disclosure requirements for periodic, current and 
other reports required to be filed by issuers registered with the 
Commission.
    We estimate that there are approximately 579 Exchange Act 
registrants that are bank holding companies or savings and loan holding 
companies. We estimate that approximately 100 bank holding companies 
have filed Forms 15 to terminate or suspend their reporting obligations 
under the Exchange Act based on the statutory changes in the JOBS 
Act.\156\ To put these numbers in context, the current PRA estimate for 
the number of annual reports on Form 10-K filed annually is 8,137. 
Moreover, for certain changes, such as the amendments to the definition 
of ``held of record'' in Rule 12g5-1, we do not have access to data to 
support a reliable estimate of the number of issuers that will not be 
required to file reports based on the JOBS Act amendments and our 
implementation of those amendments.
---------------------------------------------------------------------------

    \156\ After the JOBS Act became effective, there was an increase 
in the number of termination and suspension of registrations by bank 
holding companies. We do not anticipate a similar rate of 
deregistration for bank holding companies after revising our rules 
to reflect the new, higher deregistration threshold. As the FAST Act 
was only recently enacted, we do not have data on the number of 
savings and loan holding companies seeking to deregister. However, 
we do not expect the rate of deregistration for savings and loan 
holding companies to be as high as for bank holding companies, as 
many of the newly eligible savings and loan holding companies (20 of 
26) would have to give up an exchange listing in order to terminate 
registration and suspend reporting.
---------------------------------------------------------------------------

    As explained in the Proposing Release, because the rule amendments 
are not expected to substantially impact the overall burden estimates 
associated with our rules and forms and in light of the limitations on 
available data, we have not submitted revised burden estimates for 
these collections of information to OMB for review in accordance with 
the PRA and its implementing regulations.\157\ However, as we 
periodically update our PRA estimates in accordance with applicable 
regulations, we will make any necessary adjustments to reflect the 
actual number of filings received, including adjustments to reflect any 
reduction in filings arising from today's amendments.
---------------------------------------------------------------------------

    \157\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Act Analysis has been prepared in 
accordance with 5 U.S.C. 604. This analysis relates to the amendments 
to Securities Act Rule 405 and Exchange Act Rules 3b-4, 12g-1, 12g-2, 
12g-3, 12g-4, 12g5-1, and 12h-3.

A. Need for, and Objectives of, the Action

    The primary reason for, and objective of, the proposed amendments 
is to implement Title V and Title VI of the JOBS Act and Title LXXXV of 
the FAST Act. The JOBS Act directs the Commission to issue rules to 
implement the statutory changes and specifically charges the Commission 
with amending the definition of ``held of record'' and establishing a 
safe harbor for the determination relating to ``employee compensation 
plan'' securities. The amendments adopted today revise existing rules 
to reflect the new, higher Exchange Act registration, termination of 
registration and suspension of reporting thresholds for banks, savings 
and loan holding companies and bank holding companies, apply the 
definition of ``accredited investor'' in Securities Act Rule 501(a) in 
making determinations under Exchange Act Section 12(g)(1), revise the 
definition of ``held of record'' to exclude certain securities held by 
persons who received them pursuant to employee compensation plans, and 
establish a non-exclusive safe harbor for issuers to follow when 
determining whether those securities are ``held of record.'' 
Additionally, revising the definition and providing a non-exclusive 
safe harbor to issuers relating to the determination of securities 
``held of record'' will assist issuers in determining which holders of 
record they are required to count under the registration requirements 
of Exchange Act Section 12(g).

B. Significant Issues Raised by Public Comment

    In the Proposing Release, we requested comment on all aspects of 
the Initial Regulatory Flexibility Act (``IRFA''), including the number 
of small entities that would be affected by the proposed amendments, 
the nature of the impact, how to quantify the number of small entities 
that would be affected and how to quantify the impact of the proposed 
amendments. We did not receive comments specifically addressing the 
IRFA. We did, however, receive comments from members of the public on 
matters that could potentially impact small entities. Several 
commenters recommended a safe harbor for the establishment of a 
reasonable belief of accredited investor status.\158\ In contrast, one 
commenter opposed such a safe harbor out of concern that it would 
become a de facto minimum standard.\159\ Commenters also sought 
additional guidance or revisions to the proposed amendment to Rule 
12g5-1 and Securities Act Rule 701.\160\
---------------------------------------------------------------------------

    \158\ See letters from ADISA, CFM, Cleary, IPA. One commenter 
recommended a safe harbor for the determination specifically for 
private investment funds.
    \159\ See letter from ABA.
    \160\ See letters from ABA and ADISA.
---------------------------------------------------------------------------

C. Small Entities Subject to the Rule Amendments

    Exchange Act Rule 0-10(a) \161\ defines an entity, other than an 
investment company, to be a ``small business'' or ``small 
organization'' if it had total assets of $5 million or less on the last 
day of its most recent fiscal year. For

[[Page 28704]]

purposes of the Regulatory Flexibility Act, an investment company is a 
small entity if it, together with other investment companies in the 
same group of related investment companies, has net assets of $50 
million or less as of the end of its most recent fiscal year.\162\ We 
estimate that there are approximately 841 issuers that file with the 
Commission, other than investment companies, that may be considered 
small entities.\163\
---------------------------------------------------------------------------

    \161\ 17 CFR 240.0-10(a).
    \162\ 17 CFR 270.0-10(a).
    \163\ The staff estimate is based on a review of Form 10-K, 20-
F, 40-F filings (from EDGAR XBRL) with fiscal periods ending between 
January 31, 2015-January 31, 2016.
---------------------------------------------------------------------------

    The rule amendments establishing the use of the Securities Act Rule 
501(a) definition of ``accredited investor'' under Exchange Act Section 
12(g)(1) and revising the definition of ``held of record'' to exclude 
certain securities and establish a non-exclusive safe harbor may affect 
small issuers relying on the revised rules and safe harbor to determine 
the number of holders of record. While an issuer is not required to 
register a class of equity securities pursuant to Section 12(g) of the 
Exchange Act until the issuer's total assets exceed $10 million, a 
small business or small organization may rely on the rules when 
determining to whom to issue securities and whether to compensate 
employees with securities. By providing guidance on the meaning of the 
term ``accredited investor'' in the Exchange Act context, the rule 
amendments may facilitate private offerings and the ability of an 
issuer to determine their registration and reporting obligations. By 
excluding certain employee compensation securities from the definition 
of ``held of record,'' the rule amendments may facilitate the use of 
equity compensation by small issuers, thereby helping them to preserve 
cash and giving them greater ability to determine when the Exchange Act 
Section 12(g) registration obligation would be triggered.
    We cannot reliably estimate the number of small entities affected 
by these rule amendments. By definition, such entities are not yet 
subject to Section 12(g) registration and reporting requirements, which 
are triggered by the issuer having total assets exceeding $10 million 
as of the last day of its fiscal year. We do not otherwise have 
information about the number of shareholders at small entities, 
including those who have received securities as a result of employee 
compensation plans.

D. Reporting, Recordkeeping and Other Compliance Requirements

    The amendments' use of the Securities Act Rule 501(a) definition of 
``accredited investor'' and the definition of ``held of record'' will 
assist an issuer in determining the number of holders of record. In 
order for an issuer to rely on the safe harbor, the securities must be 
issued in a transaction exempt from, or not subject to, the 
registration requirements of Securities Act Section 5 and satisfy the 
requirements of Securities Act Rule 701(c), which includes the 
requirement that the securities be offered or sold under a written 
compensatory benefit plan or written compensation contract. In 
addition, issuers seeking to rely upon the safe harbor may need to 
maintain records to help establish their compliance with the conditions 
of the safe harbor.
    The rule amendments affecting banks, bank holding companies and 
savings and loan holding companies do not create any new reporting, 
recordkeeping or other compliance requirements for those entities. The 
rule amendments raise the thresholds relating to registration for those 
entities and therefore reduce their compliance burdens.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish the stated objective of our 
proposals, while minimizing any significant adverse impact on small 
entities. In connection with the rule amendments, we considered the 
following alternatives: (1) The establishment of differing compliance 
or reporting requirements or timetables that take into account the 
resources available to small entities; (2) the clarification, 
consolidation or simplification of compliance and reporting 
requirements under the rule for small entities; (3) the use of 
performance rather than design standards; and (4) an exemption from 
coverage of the rules, or any part of the rules, for small entities.
    We are applying the current definition of ``accredited investor'' 
in Securities Act Rule 501(a) in making determinations under Exchange 
Act Rule 12g-1(b)(1). Alternatively, we could have developed a new 
definition of ``accredited investor'' for purposes of Section 12(g)(1); 
however, given the prevalence of the use of Regulation D for exempt 
offerings, many issuers are familiar with and rely upon the definition 
in Rule 501(a). The increased registration threshold established by the 
JOBS Act is intended to permit issuers, including small entities, to 
defer Exchange Act registration until issuers have a larger shareholder 
base. Because proposed Rule 12g-1(b)(1) is intended to facilitate an 
issuer's ability to make the determination of when it is required to 
register, we believe use of the familiar performance standard in Rule 
501(a) definition of ``accredited investor'' will further this 
regulatory objective for all issuers, including small entities.
    We determined not to propose or adopt a safe harbor for the 
determination of accredited investor status. Requiring issuers to 
consider their particular facts and circumstances to establish a 
reasonable basis for their determination will provide issuers with 
flexibility in making the determination and diminish concerns that the 
information relied upon could be unreliable. Additionally, some 
standards that might be included in a safe harbor could, as one 
commenter noted, result in establishing a de facto minimum standard for 
the determination.\164\ This could shift the standard from a 
performance standard to a design standard which would provide issuers 
with less flexibility when making the determination.
---------------------------------------------------------------------------

    \164\ See letter from ABA.
---------------------------------------------------------------------------

    The revised definition of ``held of record'' and related safe 
harbor apply to all issuers, including small entities, that choose to 
exclude securities held by persons who received them pursuant to 
employee compensation plans in transactions exempt from, or not subject 
to, the registration requirements of Securities Act Section 5. The 
amendment and safe harbor help define the contours of an exemption from 
registration for issuers that might otherwise cross the Section 12(g) 
registration thresholds.
    The amendments are intended to permit issuers, including small 
entities, to exclude certain securities from the ``held of record'' 
determination and to assist issuers in making that determination by 
clarifying and simplifying requirements for all entities. Establishing 
different compliance or reporting requirements relating to employee 
compensation plan securities or accredited investor determinations for 
small entities could complicate the rules and make them more difficult 
to apply as those issuers grow, cease to be small entities, and are 
required to determine whether they must register with the Commission. 
With respect to the use of performance standards rather than design 
standards, we note that the holder of record threshold is a

[[Page 28705]]

statutorily created design standard, requiring issuers to register if 
their holders of record coupled with their total assets cross certain 
thresholds. As we are modifying the definition of ``held of record'' 
and clarifying the determination of ``accredited investor'' under this 
statutory design standard, we did not evaluate whether a performance 
standard would be more useful.

VII. Statutory Authority and Text of Rule Amendments

    The amendments contained in this release are being adopted under 
the authority set forth in Section 19 of the Securities Act, as 
amended, Sections 3(b), 12(g), 12(h), 15(d) and 23(a) of the Exchange 
Act, as amended, and Section 503 and Section 602 of the JOBS Act.

List of Subjects in 17 CFR Parts 230 and 240

    Reporting and recordkeeping requirements, Securities.

Text of the Amendments

    For the reasons set out above, the Commission amends Title 17, 
chapter II of the Code of Federal Regulations 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:

    Authority:  15 U.S.C. 77b, 77b note, 77c, 77d, 77d note, 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), unless otherwise noted.
* * * * *

0
2. Amend Sec.  230.405 by adding a Note to paragraph (1) of the 
definition of ``Foreign private issuer'' to read as follows:


Sec.  230.405  Definitions of terms.

* * * * *

Foreign private issuer. (1) * * *
    Note to paragraph (1) of the definition of Foreign private issuer: 
To determine the percentage of outstanding voting securities held by 
U.S. residents:
    A. Use the method of calculating record ownership in Sec.  
240.12g3-2(a) of this chapter, except that:
    (1) The inquiry as to the amount of shares represented by accounts 
of customers resident in the United States may be limited to brokers, 
dealers, banks and other nominees located in:
    (i) The United States,
    (ii) The issuer's jurisdiction of incorporation, and
    (iii) The jurisdiction that is the primary trading market for the 
issuer's voting securities, if different than the issuer's jurisdiction 
of incorporation; and
    (2) Notwithstanding Sec.  240.12g5-1(a)(8) of this chapter, the 
issuer shall not exclude securities held by persons who received the 
securities pursuant to an employee compensation plan.
    B. If, after reasonable inquiry, the issuer is unable to obtain 
information about the amount of shares represented by accounts of 
customers resident in the United States, the issuer may assume, for 
purposes of this definition, that the customers are residents of the 
jurisdiction in which the nominee has its principal place of business.
    C. Count shares of voting securities beneficially owned by 
residents of the United States as reported on reports of beneficial 
ownership provided to the issuer or filed publicly and based on 
information otherwise provided to the issuer.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
3. The general authority citation for part 240 is revised to read as 
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; 
Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, 
sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.

* * * * *

0
4. Amend Sec.  240.3b-4 by redesignating the Instruction to paragraph 
(c)(1) as Note to paragraph (c)(1), and revising newly redesignated 
Note to paragraph (c)(1) to read as follows:


Sec.  240.3b-4  Definition of ``foreign government,'' ``foreign 
issuer'' and ``foreign private issuer''.

* * * * *
    (c) * * *
    Note to paragraph (c)(1): To determine the percentage of 
outstanding voting securities held by U.S. residents:
    A. Use the method of calculating record ownership in Sec.  
240.12g3-2(a), except that:
    (1) Your inquiry as to the amount of shares represented by accounts 
of customers resident in the United States may be limited to brokers, 
dealers, banks and other nominees located in:
    (i) The United States,
    (ii) Your jurisdiction of incorporation, and
    (iii) The jurisdiction that is the primary trading market for your 
voting securities, if different than your jurisdiction of 
incorporation; and
    (2) Notwithstanding Sec.  240.12g5-1(a)(8) of this chapter, you 
shall not exclude securities held by persons who received the 
securities pursuant to an employee compensation plan.
    B. If, after reasonable inquiry, you are unable to obtain 
information about the amount of shares represented by accounts of 
customers resident in the United States, you may assume, for purposes 
of this definition, that the customers are residents of the 
jurisdiction in which the nominee has its principal place of business.
    C. Count shares of voting securities beneficially owned by 
residents of the United States as reported on reports of beneficial 
ownership provided to you or filed publicly and based on information 
otherwise provided to you.
* * * * *

0
5. Revise Sec.  240.12g-1 to read as follows:


Sec.  240.12g-1  Registration of securities; exemption from section 
12(g).

    An issuer is not required to register a class of equity securities 
pursuant to section 12(g)(1) of the Act (15 U.S.C. 78l(g)(1)) if on the 
last day of its most recent fiscal year:
    (a) The issuer had total assets not exceeding $10 million; or
    (b) (1) The class of equity securities was held of record by fewer 
than 2,000 persons or 500 persons who are not accredited investors (as 
such term is defined in Sec.  230.501(a) of this chapter, determined as 
of such day rather than at the time of the sale of the securities); or
    (2) The class of equity securities was held of record by fewer than 
2,000 persons in the case of a bank; a savings and loan holding 
company, as such term is defined in section 10 of the Home Owners' Loan 
Act (12 U.S.C. 1461); or a bank holding company, as such term is 
defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841).

0
6. Revise Sec.  240.12g-2 to read as follows:


Sec.  240.12g-2  Securities deemed to be registered pursuant to section 
12(g)(1) upon termination of exemption pursuant to section 12(g)(2)(A) 
or (B).

    Any class of securities that would have been required to be 
registered pursuant to section 12(g)(1) of the Act (15 U.S.C. 
78l(g)(1)) except for the fact

[[Page 28706]]

that it was exempt from such registration by section 12(g)(2)(A) of the 
Act (15 U.S.C. 78l(g)(2)(A)) because it was listed and registered on a 
national securities exchange, or by section 12(g)(2)(B) of the Act (15 
U.S.C. 78l(g)(2)(B)) because it was issued by an investment company 
registered pursuant to section 8 of the Investment Company Act of 1940 
(15 U.S.C. 80a-8), shall upon the termination of the listing and 
registration of such class or the termination of the registration of 
such company and without the filing of an additional registration 
statement be deemed to be registered pursuant to section 12(g)(1) of 
the Act if at the time of such termination:
    (a) The issuer of such class of securities has elected to be 
regulated as a business development company pursuant to sections 55 
through 65 of the Investment Company Act of 1940 (15 U.S.C. 80a-54 
through 64) and such election has not been withdrawn; or
    (b) Securities of the class are not exempt from such registration 
pursuant to section 12 of the Act (15 U.S.C. 78l) or rules thereunder 
and all securities of such class are held of record by 300 or more 
persons, or 1,200 or more persons in the case of a bank; a savings and 
loan holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841).
0
7. Amend Sec.  240.12g-3 by revising paragraphs (a)(2), (b)(2), and 
(c)(2) to read as follows:


Sec.  240.12g-3  Registration of securities of successor issuers under 
section 12(b) or 12(g).

    (a) * * *
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841).
* * * * *
    (b) * * *
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841).
* * * * *
    (c) * * *
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841).
* * * * *
0
8. Amend Sec.  240.12g-4 by revising paragraph (a) to read as follows:


Sec.  240.12g-4  Certifications of termination of registration under 
section 12(g).

    (a) Termination of registration of a class of securities under 
section 12(g) of the Act (15 U.S.C. 78l(g)) shall take effect 90 days, 
or such shorter period as the Commission may determine, after the 
issuer certifies to the Commission on Form 15 (Sec.  249.323 of this 
chapter) that the class of securities is held of record by:
    (1) Fewer than 300 persons, or in the case of a bank; a savings and 
loan holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841), 1,200 persons; or
    (2) Fewer than 500 persons, where the total assets of the issuer 
have not exceeded $10 million on the last day of each of the issuer's 
most recent three fiscal years.
* * * * *
0
9. Amend Sec.  240.12g5-1 by adding paragraph (a)(8) to read as 
follows:


Sec.  240.12g5-1  Definition of securities ``held of record''.

    (a) * * *
    (8)(i) For purposes of determining whether an issuer is required to 
register a class of equity securities with the Commission pursuant to 
section 12(g)(1) of the Act (15 U.S.C. 78l(g)(1)), an issuer may 
exclude securities:
    (A) Held by persons who received the securities pursuant to an 
employee compensation plan in transactions exempt from, or not subject 
to, the registration requirements of section 5 of the Securities Act of 
1933 (15 U.S.C. 77e); and
    (B) Held by persons who received the securities in a transaction 
exempt from, or not subject to, the registration requirements of 
section 5 of the Securities Act (15 U.S.C. 77e) from the issuer, a 
predecessor of the issuer or an acquired company in substitution or 
exchange for excludable securities under paragraph (a)(8)(i)(A) of this 
section, as long as the persons were eligible to receive securities 
pursuant to Sec.  230.701(c) of this chapter at the time the excludable 
securities were originally issued to them.
    (ii) As a non-exclusive safe harbor under this paragraph (a)(8):
    (A) An issuer may deem a person to have received the securities 
pursuant to an employee compensation plan if such plan and the person 
who received the securities pursuant to the plan met the plan and 
participant conditions of Sec.  230.701(c) of this chapter; and
    (B) An issuer may, solely for the purposes of Section 12(g) of the 
Act (15 U.S.C. 78l(g)(1)), deem the securities to have been issued in a 
transaction exempt from, or not subject to, the registration 
requirements of Section 5 of the Securities Act (15 U.S.C. 77e) if the 
issuer had a reasonable belief at the time of the issuance that the 
securities were issued in such a transaction.
* * * * *
0
10. Amend Sec.  240.12h-3 by revising paragraph (b)(1) to read as 
follows:


Sec.  240.12h-3  Suspension of duty to file reports under section 
15(d).

* * * * *
    (b) * * *
    (1) Any class of securities, other than any class of asset-backed 
securities, held of record by:
    (i) Fewer than 300 persons, or in the case of a bank; a savings and 
loan holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841), 1,200 persons; or
    (ii) Fewer than 500 persons, where the total assets of the issuer 
have not exceeded $10 million on the last day of each of the issuer's 
three most recent fiscal years; and
* * * * *

    By the Commission.

    May 3, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-10746 Filed 5-9-16; 8:45 am]
 BILLING CODE 8011-01-P