electronically mediated work as an employment arrangement where
workers: (1) Use a platform provider's website or mobile app to
connect to clients or customers and obtain short jobs, projects, or
tasks; (2) are paid by or through the platform provider that owns
the website or mobile app, (3) choose when and whether to work, (4)
may do these short jobs, projects, or tasks in person or online.
---------------------------------------------------------------------------

    The Federal Reserve 2018 Survey of Household Economics and Decision
Making (the ``2018 SHED Survey'') \118\ finds that 30 percent of adults
engaged in gig economy related work, including both the provision of
services and the sale of goods, and using both online and offline
methods, in 2018. The survey also finds that three percent of adults
surveyed participated in gig economy work enabled by the internet or a
mobile app to connect to customers.
---------------------------------------------------------------------------

    \118\ The Federal Reserve has conducted the Survey of Household
Economics and Decision Making on an annual basis starting in 2013.
---------------------------------------------------------------------------

    Another study uses private data to examine various characteristics
and trends of a subsection of the gig economy, namely the online
platform economy and its participants.\119\ It analyzed a sample
comprised of 39 million unique checking accounts over the October 2012-
March 2018 period \120\ and found a significant increase in the number
of families receiving income from providing goods and services using
online platforms.\121\ For example, in 2013, less than 0.5 percent of
the sample checking accounts received income from work performed
through an online platform, whereas that number increased to 1.6
percent in 2018.\122\ The study further breaks down income sources from
online platform utilization into four categories: (1) Transportation,
(2) non-transport work (includes services such as dog walking and home
repair), (3) selling of goods, and (4) leasing.\123\ As of March 2018,
online

platform workers in categories (1) and (2) constituted approximately 65
percent of the workers in all four categories. Over the 2013-2018
period, the transportation services category has shown the most
significant growth, increasing from less than 10 percent of online
platform workers in 2013 to approximately 60 percent of online platform
workers in 2018.
---------------------------------------------------------------------------

    \119\ Diana Farrell, Fiona Greig & Amar Hamoudi, The Online
Platform Economy in 2018: Drivers, Workers, Sellers, and Lessors,
JPMorgan Chase Institute, (2018) (the ``Farrell Study'').
    \120\ The study applies multiple filters to select the accounts
in the final sample. These filters are described in the Appendix of
the study.
    \121\ In order for an online platform to be included in the
Farrell Study, it had to meet the following criteria: (1) The
platform connects independent suppliers to customers, (2) the
platform mediates the flow of payment from customer to supplier, (3)
the platform empowers participants to enter and leave the market
whenever they want. The study identified 128 online platforms based
on the three criteria above. We believe the definition of gig
economy applied in this study most closely resembles the definition
of online platform workers used in the proposed amendments to Rule
701 and Form S-8.
    \122\ The Farrell Study also notes that as of March 2018, about
4.5% of accounts examined received income from an online platform at
some point over the prior year.
    \123\ Companies identified in categories (1) and (2) in the
Farrell Study are likely to have a significant overlap with the
companies that are likely to be included in the proposed expansion
of Rule 701 and Form S-8, given the overlap between the provided
definition of these categories and the scope of the proposed
amendments. Specifically, categories (1) and (2) represent companies
that are online platforms specializing in connecting customers with
independent suppliers for the provision of services. Some of the
companies in the Farrell Study's leasing category may also fall
within our proposed definition of services.
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2. Characteristics of Gig Economy Workers
    In this section, we summarize findings from studies and surveys on
the gig economy with respect to the characteristics of participants in
such work arrangements. In general, multiple sources lead to the
conclusion that, although the frequency of participation varies, the
average gig economy worker engages in such work periodically throughout
the year. In addition, the average gig economy worker seems to
participate in such work in order to supplement her basic source of
income and is relatively younger in age than traditional employees.
    The 2018 SHED Survey finds that the majority of gig economy workers
tend to engage in such work to generate income in addition to their
primary source of income. For example, the survey finds that about 37
percent of gig economy workers indicated that they engage in such work
to supplement their income, whereas 18 percent indicated that their
primary source of income comes from gig-related work. In addition, only
30 percent of gig economy workers responded that they earn income from
such activities in all or most months of the year. With respect to
participation rates involving the use of a website or mobile app to
connect to customers, the survey documents five percent of individuals
between the ages of 18 and 29 using such methods to find customers,
whereas one percent of individuals aged 60 or older used such method to
find work. The 2018 SHED Survey also documents that individuals younger
in age tend to be more active in gig-related work. Overall
participation rates ranged from 37 percent for individuals between the
ages of 18 and 29 to 21 percent for individuals 60 year old or older.
    The Farrell Study finds that among individuals or families
participating in the gig economy through online platforms, more than 60
percent derived earnings from online platform related work between one
and three months out of the year. About 10 percent of workers received
payments due to online platform related work between 10 and 12 months
of the year. For transportation platforms specifically, 12.5 percent of
individuals generated income between 10 and 12 months of the year.
These statistics indicate that the majority of online platform workers
generated income from the use of these online platforms periodically
throughout the year.
    The Hall Study analyzes the labor market for Uber drivers in the
United States based on a survey of Uber drivers in 2014 and 2015. Among
other findings, the study documents that more than half of Uber drivers
who started on the platform in the first half of 2013 remained active a
year after starting, and one-third were still active two years after
starting. In general, the study finds that the majority of Uber drivers
use the platform because they value the flexibility to choose when to
work and the ability to generate additional income when needed.
3. The Online Platform Economy
    As discussed above, we observe that there is a trend of increased
activity under all definitions of the ``gig economy,'' although the
extent of that increase varies across the data analyzed in various
studies. Concerning online platform work specifically, the trends are
relatively clear in that there has been a significant expansion of both
online platforms and individuals using these online platforms to
generate income in the last few years. Moreover, the majority of users
of such platforms use them to supplement their income when needed and
value the flexibility of the working hours that the platform work
offers.
    The Rand-Princeton Survey estimates that about 0.5 percent of the
workforce in 2015 used an online platform to connect to customers. The
2017 Contingent Worker Supplement estimates that 1.6 million workers,
or approximately one percent of the workforce, used an online platform
to connect to customers and provide services. The Farrell Study
estimates that about one percent of the 37 million checking accounts
examined received income from the use of an online platform to connect
with customers to provide services, with a growth rate from 2016 to
2018 of 100 percent. Finally, the 2018 SHED Survey documents that three
percent of adults surveyed participated in gig work enabled by the
internet or a mobile app to connect to customers, a percentage that
includes both the provision of services and the sale of goods. Among
all sectors examined, the passenger transportation services sector is
the only sector where all available evidence suggests a dramatic
increase in the use of online platforms as an intermediary for such
work.\124\
---------------------------------------------------------------------------

    \124\ See 2019 Abraham Study, supra note 107.
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B. Broad Economic Considerations

    Below, we discuss broad economic considerations derived from the
academic literature focusing on non-executive employee incentive-based
pay and identify certain limitations of the applicability of such
literature to platform providers and platform workers due to their
differing characteristics relative to traditional employees.
    In general, economic theory suggests that variable pay, including
equity-based pay,\125\ can serve as a mechanism to align the incentives
of agents with those of principals and can lead to enhanced agent
performance.\126\ Academic literature that examines compensation
arrangements of Chief Executive Officers (CEOs), in general, finds a
positive correlation between various forms of variable pay and future
outcomes, such as issuer performance, when such forms of variable pay
are used appropriately.\127\ There is also academic literature that
examines non-executive employee compensation arrangements. Although
this stream of literature highlights the potential incentive alignment
effect that equity-based pay may have on employees, it also highlights
other important considerations that may drive issuers to use such
compensatory benefit plans. Specifically, it finds that issuers may use
non-executive employee compensation arrangements to attract and retain
talent. Thus, we expect that the proposed amendments likely would
enhance the ability of affected issuers to compete in the labor market.
This benefit likely would be more important if these issuers compete
with traditional issuers for the same pool of workers,

particularly for workers with specialized skills.
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    \125\ Although the scope of the proposed rules is broader than
``equity-based'' compensation, we believe that most, if not all,
issuances under Rule 701(h) will be equity-based securities.
    \126\ Academic literature usually considers the agency
relationship between investors or issuer owners (principals) and
issuer management (agents). Within the issuer, agency relationships
can also exist between management (principal) and non-management
employees (agents). See, e.g., Michael Jensen & William Meckling,
Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership
Structure, 3 J. FIN. ECON. 305 (1976).
    \127\ Under certain circumstances, inappropriate structures of
compensation contracts may lead to undesirable outcomes, such as
inappropriate risk taking.
---------------------------------------------------------------------------

    Academic literature also finds that issuers with non-executive
employee option plans use funds that would otherwise be used to
compensate employees in other areas of the issuer. We expect affected
issuers would be able to improve their allocation of capital as a
consequence of the proposed rules. The latter may be particularly
important for issuers that are financially constrained.
    Although academic theory and findings concerning the economic
effects of the use of equity-based pay may apply to both traditional
employees and platform workers up to a certain extent, there could be
differences due to the differences between online platform workers and
traditional employees. Specifically, platform workers may have
different motives for undertaking such work and different employment
horizons.\128\ As such, online platform workers might respond
differently to equity-based pay as compared to traditional employees,
making the economic effects of equity-based pay for these workers
difficult to predict. Moreover, the economic effects of the proposed
amendments will be affected by the restrictions on the use of equity-
based pay under the proposed amendments and will depend on how affected
issuers structure compensation arrangements based on each issuer's
facts and circumstances.
---------------------------------------------------------------------------

    \128\ For example, the majority of gig economy workers appear to
engage in such work to supplement their basic income, and may engage
in such work on a more sporadic basis, relative to traditional
employees. See supra Section IV.A.2.
---------------------------------------------------------------------------

    Equity-based pay also will introduce liquidity and valuation risks
to the compensation of platform workers. Such risks are likely to be
more significant for compensation offered by non-reporting issuers. For
example, the transferability prohibition in the proposed amendments to
Rule 701 will introduce illiquidity in the compensation of non-
reporting issuers' platform workers. Further, the relatively more
opaque information environment of non-reporting issuers is likely to
lead to increased valuation risk in the equity-based compensation
offered. These increased risks are likely to reduce the expected
benefits of the proposed amendments for non-reporting issuers and their
platform workers.
    Below we discuss the expected benefits and costs from the proposed
rules in more detail.

C. Expected Economic Benefits and Costs

    In this section, we discuss the expected economic benefits from the
proposed amendments, including potential factors that are likely to
introduce some uncertainty as to the expected benefits from the
proposed amendments. We then discuss how the furnished information
concerning how platform providers use the provisions in the proposed
amendments may serve to inform the Commission about whether to
undertake further action. Finally, we discuss potential costs related
to the proposed amendments.
1. Expected Economic Benefits
    Providing issuers greater flexibility in the use of equity-based
compensation may allow issuers to design compensation contracts or
arrangements that are more efficient in aligning employee incentives
with those of investors. Improved incentives could lead to increased
effort and improved decision-making by platform workers.\129\ Evidence
in the academic literature shows a positive correlation between the use
of non-executive stock option compensation and measures of operating
performance and issuer innovation, but that such effect varies
depending on facts and circumstances.\130\ Evidence also shows that the
effect of non-executive stock options tends to be stronger when such
plans are broadly implemented within the issuer.\131\
---------------------------------------------------------------------------

    \129\ It should be noted that the efficiency of variable pay may
be higher when the metric/signal used to determine the variable
component of pay accurately reflects the agent's effort and
performance. Due in part to the business model of online platforms,
and in part due to technological advances, online platform workers'
effort and performance may be measured with higher accuracy than in
traditional business models. For example, Uber drivers have an
individual rating that is based on direct inputs from multiple
customers receiving the service. This characteristic of the online
platform business model may facilitate more efficient contracting
between the issuer and workers.
    \130\ See Xin Chang, Kangkang Fu, Angie Low & Wenrui Zhang, Non-
executive employee stock options and corporate innovation, 115 J.
FIN. ECON. 168 (2015). The study uses a sample of S&P 1500 companies
over the 1998-2003 period to examine the effect of stock options
granted to non-executive employees on corporate innovation, as
measured by patent applications and patent citations. The study
documents a positive relation between the use of stock options to
compensate non-executive employees and proxies for corporate
innovation. The study also finds that the effect of employee stock
options on innovation is due mostly to the risk-taking incentive
that stock options provide to employees rather than the incentive to
exert effort. See also Yael Hochberg & Laura Lindsey, Incentives,
Targeting, and Firm Performance: An Analysis of Non-executive Stock
Options, 23 REV. FIN. STUD. 4148 (2010) (the ``Hochberg Study'').
The study uses a sample of S&P 1500 companies over the 1997-2004
period to examine the effect of employee stock options on issuer
performance. The study documents a positive relation between implied
incentives from employee stock options and future operating
performance, on average. The study also documents that the positive
relation between employee stock options and firm performance is
concentrated in smaller firms and firms with significant growth
options. Moreover, the study shows that such effect is stronger for
broad-based option plans as they induce a mutual monitoring effect
within employees.
    \131\ See Hochberg Study, supra note 130.
---------------------------------------------------------------------------

    The proposed amendments may provide affected companies with
additional resources, which may particularly benefit issuers that face
capital constraints. Permitting issuers to use securities to compensate
online platform workers may free up resources. This would permit
issuers to reallocate resources towards other productive uses. Academic
literature that examines the use of non-executive employee stock
options finds that such compensatory plans are more frequently used by
issuers facing capital requirements and financing constraints.\132\ We
expect that capital constraints are more likely to be a concern for at
least a subset of non-reporting issuers. We thus expect the proposed
amendments to provide these issuers with increased flexibility in terms
of available resources.
---------------------------------------------------------------------------

    \132\ See John Core & Wayne Guay, Stock Option Plans for Non-
Executive Employees, 61 J. FIN. ECON. 253 (2001). The study examines
detailed information about non-executive employee stock option
holdings, grants, and exercises for 756 companies during the 1994-
1997 period. Among other findings, the study's results support the
hypothesis that options are granted to non-executives more
intensively when firms have greater financing needs and face
financing constraints. See also Ilona Babenko, Michael Lemmon & Yuri
Tserlukevich, Employee Stock Options and Investment, 66 J. FIN. 981
(2011). The study examines a sample of 1,773 companies over the
period 2000 to 2005 with regards to their broad-based employee stock
option programs. The study finds evidence consistent with the idea
that stock options can mitigate financing constraints by
substituting for cash wages at the time of the grant, and by
providing significant cash inflows at the time of exercise,
conditional on a high stock price. The study further estimates that
$0.34 of each dollar of cash inflow received by the firm from the
exercise of stock options is allocated to increasing capital and R&D
expenditures.
---------------------------------------------------------------------------

    The proposed amendments would permit affected issuers to offer
compensatory securities to, in addition to natural persons, entities
meeting specified conditions. As stated above, the gig economy is an
evolving market in which participating workers may be organized in
various ways. We expect this proposed amendment to expand the set of
affected issuers that would be eligible to use securities to compensate
platform workers. Also, the proposed amendment may benefit platform
workers as it would allow them to optimize their preferred
organizational structure while being eligible to receive

compensatory securities for services provided through the online
platform.
    Finally, to the extent that issuers that use platform workers--
i.e., ``platform providers''--compete for labor with issuers that offer
traditional employment, the use of equity-based compensation could
permit platform providers to be more competitive in the labor market.
Currently, platform providers cannot rely on Rule 701 or use Form S-8
to issue securities as compensation to their platform workers. They are
thus at a disadvantage in terms of offering compensation contracts that
are likely to attract and retain platform workers. Facilitating
platform providers' efforts to attract and retain platform workers
could increase their competitiveness.
    To the extent that platform providers require platform workers with
specialized skills, the academic literature provides evidence that
issuers are more likely to use employee stock option plans when they
need to attract employees with skills that may be critical for an
issuer's success.\133\ Relatedly, to the extent that platform providers
benefit from having exclusive access to platform workers, we expect the
proposed amendments to facilitate such efforts.
---------------------------------------------------------------------------

    \133\ See id.
---------------------------------------------------------------------------

    There are, however, potential factors that likely introduce some
uncertainty as to the expected benefits from the proposed amendments.
First, issuing securities as compensation would introduce liquidity and
valuation risks. These risks are likely to create uncertainty in the
value of platform workers' compensation. This may partially offset
benefits arising from greater incentive alignment. Specifically,
depending on the facts and circumstances, this uncertainty could lead
platform workers to discount the value of such pay to varying extents.
We expect the liquidity and valuation risks to be relatively more
pronounced for non-reporting issuers, as their information environment
is more opaque and the compensatory securities would not be sellable.
If platform workers demand additional pay as compensation for bearing
these risks, equity-based pay would be a more costly form of
compensation for the issuer (relative to cash).\134\ Thus, issuers may
need to provide increased amounts of equity-based pay to be able to
offer an overall compensation value that would attract and retain
employees.\135\
---------------------------------------------------------------------------

    \134\ See Brian Hall & Kevin Murphy, Stock Options for
Undiversified Executives, 33 J. ACCT. & ECON. 3 (2002). The study
analyzes the value of non-tradeable options held by undiversified
and risk-averse executives. The study distinguishes between the
value of the option to the executive, and the cost of the option to
the issuer. Intuitively, the paper provides evidence that risk-
aversion and non-diversification create a difference between the
issuer cost and the executive value of stock options. See also Lisa
Meulbroek, The Efficiency of Equity-Linked Compensation:
Understanding the Full Cost of Awarding Executive Stock Options, 30
FIN. MGMT. 2 (2001). The study argues that undiversified managers
will value stock or option-based compensation at less than its
market value and derives a method to measure such deadweight costs,
ultimately concluding that undiversified managers at rapidly
growing, entrepreneurial-based firms heavily discount the value of
these options.
    \135\ In economic theory, this is referred to as the reservation
wage of the agent/employee. The expected value of the compensation
offered must meet the minimum required compensation that the
employee requires to participate in a specific job or task.
---------------------------------------------------------------------------

    In addition, the motives of workers that choose to engage in
platform work differs from those of workers that engage in traditional
forms of employment. As discussed above, surveys of the online platform
economy show that the majority of online platform workers (1) earn
secondary income from such work and (2) tend to participate selectively
in such work during times when their demand for immediate income is
high. As such, it may be reasonable to assume that the majority of
online platform workers place particular value on the ability to
generate immediate income from platform-based work. Therefore, the
transfer prohibitions in the proposed amendments \136\ may limit the
benefit of the amendments in terms of platform worker attraction and
retention, and platform worker incentive alignment.\137\
---------------------------------------------------------------------------

    \136\ Specifically, the proposed amendments to Rule 701 require
the issuer to take reasonable steps to prohibit the transfer of
securities issued to platform workers pursuant to the exemption,
other than a transfer to the issuer or by operation of law.
    \137\ Transfer restrictions reduce the liquidity of equity-based
compensation, leading recipients of such compensation to discount
the value of the equity-based pay they are offered. Companies thus
may need to provide additional pay to compensate online platform
workers for the possible lack of liquidity in their compensation
arrangements.
---------------------------------------------------------------------------

    Platform workers may benefit from the proposed amendments,
depending on how affected issuers structure compensation contracts
under the proposed amendment. For example, the proposed amendments
would provide an opportunity for platform workers to own equity in the
platform provider, possibly at an earlier stage of development. If the
platform provider's value increases in the future, platform workers
holding its securities would experience an increase in their wealth.
    Under the proposed amendments, issuers that issue securities to
platform workers would be required to furnish certain information to
the Commission on a periodic basis.\138\ We believe that this
information would provide insight into how affected companies are using
these compensatory securities. We also believe it could help inform our
assessment of the potential benefits of broadening the scope of work
relationships for which issuers may issue securities as
compensation.\139\ If, however, not all of the issuers furnish the
required information, the collected information would be incomplete and
could be biased, which could weaken the magnitude of this benefit.
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    \138\ Although the proposed rule would require issuers to
furnish certain information, furnishing the identified information
would not be a condition to rely on Rule 701 or Form S-8. See supra
Section II.F.
    \139\ Relatedly, while it is too early to assess the long-term
effects of the COVID-19 pandemic on the gig economy, we intend to
monitor developments in this area.
---------------------------------------------------------------------------

    The proposed amendments to Rule 12g5-1 would extend the exclusion
from the definition of securities ``held of record,'' and the
corresponding safe harbor, to securities held by platform workers who
received them under the proposed amendment to Rule 701. This would
allow non-reporting issuers that issue compensatory securities to
platform workers to control how and when they become subject to
reporting requirements. The proposed amendment to Rule 12g5-1 could be
particularly beneficial for cash-constrained issuers, which would be
able to issue compensatory securities to their platform workers without
being subject to the compliance costs associated with the Exchange Act
reporting requirements. The proposed amendment to Rule 12g5-1 would not
be temporary. We expect that issuers will benefit from the non-
temporary nature of this proposed amendment because it will allow them
to weigh the costs and benefits of using the exemption without it
causing them to become subject to Exchange Act reporting requirements
and the associated compliance costs, if the exemption is not extended.
    The proposed amendments would ensure that estates of deceased
employees and representatives of incompetent former employees would
receive securities underlying options, warrants, or rights issued to a
former employee pursuant to Rule 701. Given that such options,
warrants, or rights typically include a vesting period, the proposed
amendment would benefit issuers and platform workers as it would
provide certainty to platform workers that securities related to
options, warrants, or rights would be received by executors,
administrators, or beneficiaries in the future. We expect the proposed
amendment to strengthen the anticipated benefits described above.

2. Expected Economic Costs
    To the extent that the proposed amendments result in an expanded
use of Rule 701 and Form S-8 to issue compensatory securities, there
would be a corresponding increase in the overall burden estimates
associated with these provisions for purposes of the Paperwork
Reduction Act. We discuss these increased burden estimates in Section
V.C below.
    Under the proposed amendments, any issuer that grants compensatory
securities to platform workers would be required to furnish certain
information to the Commission at six-month intervals. Furnishing this
required information would impose certain costs on affected issuers to
compile and submit the specified information. As discussed in Section
V.C below, for purposes of the Paperwork Reduction Act, we estimate
that this aspect of the proposed amendments would result in an
additional 1.5 burden hours per semi-annual response for non-reporting
issuers and 1 additional burden hour per semi-annual response for
registrants.
    Affected issuers may incur costs in establishing and administering
a compensation program for platform workers. We expect such costs
(including but not limited to accounting and legal costs, and costs
related to preparing and filing a registration statement, if
applicable) to vary based on facts and circumstances. If an affected
issuer already has an established compensation plan for employees, then
the incremental cost to administer a similar program for, or amend the
plan to include, platform workers is likely to be relatively low. Such
costs are likely to be relatively higher for issuers that do not have
an existing employee compensation plan in place.\140\ Similarly, the
incremental costs incurred by registrants that already register offers
and sales of securities on Form S-8 under their employee compensation
plans would be lower than those for registrants registering securities
on Form S-8 for the first time. We are not able to quantify these
potential costs due to lack of data.
---------------------------------------------------------------------------

    \140\ We expect that platform providers would incur legal costs
to create the equity-based compensation contract. We do not expect
plan administration costs to be material, however, as it is our
understanding that most plans are not tax-qualified plans and
therefore are not required to adhere to ERISA requirements, which
can be costly.
---------------------------------------------------------------------------

    Affected workers could incur costs that could vary based on how
issuers structure compensation packages and to the extent awards under
compensation plans are substituted for cash or other compensation. As
discussed above, any illiquidity and valuation risks associated with
these securities could lower their value to the holder. If affected
companies offer securities in lieu of cash compensation, the overall
value of the compensation to the platform worker may decline. We expect
such potential costs to be mitigated by the limit on the amount of
compensatory securities that may be offered by affected issuers, as
well as by competition for platform workers in labor markets.

D. Effects on Efficiency, Competition, and Capital Formation

    The proposed amendments are expected to increase the
competitiveness of affected issuers in their efforts to attract and
retain workers, to the extent that the affected issuers compete with
one another and with traditional issuers for the same workers. As
discussed above, however, the extent of any increase in their
competitiveness would depend on how affected issuers use the increased
flexibility offered by the proposed amendments in designing
compensation arrangements for online platform workers.
    To the extent that the proposed amendments enable affected issuers
to improve the quality and the incentive alignment of their workforce,
it could improve these issuers' overall operational efficiency and thus
enhance their ability to attract capital. Similarly, the additional
flexibility to issue securities as compensation for platform workers
may free up resources, particularly for capital-constrained issuers,
permitting these issuers to reallocate resources to other productive
uses.

E. Reasonable Alternatives

    The amendments are proposed primarily on a five-year temporary
basis. We could have proposed all of the amendments on a permanent
basis. A permanent rule would provide more certainty to issuers and
might encourage additional use of the proposed amendments, particularly
if the initial set-up costs for such compensation programs are high. As
noted above, however, there are uncertainties surrounding the nature of
these companies' business models, and the gig economy continues to
evolve. Moreover, data shows that platform workers, on average, may
have different motivations than traditional employees for undertaking
work. Specifically, as discussed above, platform workers appear to be
driven mainly by an effort to supplement basic sources of income when
additional income is needed. As such, platform workers are likely to
differ from traditional employees in their time horizon for such work.
Due to these uncertainties, it is challenging to predict how issuers
affected by the rule would use securities for compensatory purposes and
how platform workers receiving such compensation would perceive its
value.
    Adopting the amendments on a temporary basis would allow the
Commission to assess their effectiveness and make any necessary
adjustments before implementing a permanent rule. Specifically, the
information furnished by issuers that choose to rely on the proposed
amendments would serve to inform the Commission on any potential future
adjustments. For example, information collected would inform the
Commission on the extent to which gig economy companies issue
compensatory securities and how they structure such compensation across
the various online platforms based on their facts and circumstances.
Such information could be used to assess whether and how the proposed
amendments should be extended or made permanent.
    The proposed amendments' scope is limited to a part of the gig
economy. We could have proposed amendments that apply to all gig
economy issuers and corresponding workers. Such an alternative would
have allowed additional gig economy companies, for example online
platforms that facilitate the sale of goods, to compensate their
platform workers with securities. Under such alternative, a broader set
of gig economy companies would be able to issue securities as
compensation to platform workers, with the expected benefits as
described above for gig economy companies with platform workers who
provide services. The different nature of platform workers as compared
to traditional employees introduces some uncertainty as to the effects
of the proposed amendments, as discussed above. Thus, proposing the
amendments with an expanded scope would likely carry increased
uncertainty as to the amendments' economic impact.
    Further, we could have proposed different limits, including no
limits, on the amount of compensatory securities that may be offered to
individual platform workers. The proposed rule would limit equity-based
compensation to 15 percent of the total compensation provided on a 12-
month basis and no more than $75,000 over a 36-month period. The
proposed limits could have been higher or lower, or could apply to
longer or shorter periods, allowing affected issuers to include
different amounts of securities in compensation

arrangements. We are unable to evaluate with precision whether a higher
or lower cap or a longer or shorter period would be preferable in
comparison to the proposed amendments' requirements, due mostly to the
lack of data and also due to uncertainty as to how affected issuers may
use the new form of compensation available to them. In general,
allowing for greater amounts of equity-based compensation would provide
companies with additional flexibility to structure compensation
arrangements that might provide stronger incentives, a potentially
increased ability to compete for talent, and more flexibility in terms
of internal capital-allocation options. Going further, we could have
proposed no individual limit on the amount of compensatory securities
that may be offered to individual platform workers. However, as
discussed above, due in part to the nature of equity-based compensation
and in part due to the characteristics of platform workers, equity-
based compensation may be a more costly way to compensate and provide
incentives. Accordingly, it is unclear to what extent issuers would
take advantage of the ability to issue greater amounts of securities-
based compensation. Limiting issuers to lower amounts of securities-
based compensation, on the other hand, may not provide adequate
flexibility to affected issuers to incorporate equity-based
compensation into compensation arrangements, thus limiting the
potential benefits of the proposed amendments.
    The proposed changes to Rule 701 would require the issuer to take
reasonable steps to prohibit the transferability of securities issued
to platform workers pursuant to the exemption, except for transfers to
the issuer or by operation of law, while the proposed changes to Form
S-8 would not include such a requirement. As discussed above, the
transferability restriction is likely to affect the perceived value of
compensatory securities offered pursuant to revised Rule 701 and as a
consequence weaken the magnitude of expected benefits from the proposed
amendments to Rule 701. We could have proposed an extended holding
period in lieu of an outright restriction on transfer, or eliminate the
transfer restrictions altogether. Eliminating the transfer restriction
would provide issuers issuing shares pursuant to Rule 701 and
registrants registering the issuance of shares on Form S-8 with the
same expected benefits in terms of their ability to attract and retain
platform workers. Introducing a defined holding period would provide
some certainty as to when these securities become transferable and
potentially increase their value for platform workers. However, doing
so could increase the risk of an informal market developing for such
securities, which given the opaque information environment of non-
reporting issuers, could lead to adverse consequences for platform
workers and other investors.
    Securities offered to platform workers under the proposed amendment
to Rule 701 would be aggregated with securities offered to employees
under the current Rule 701 exemption in order to determine whether the
issuer is required to deliver certain disclosure under Rule 701(e), and
whether the overall cap on compensatory securities offerings has been
met under Rule 701(d). Alternatively, we could have proposed a separate
cap for compensatory securities offered to platform workers. Such
alternative would increase the amount of securities that could be
issued to platform workers for issuers with a mix of traditional
employees and platform workers, leading to potentially greater benefits
for these issuers. However, it is possible that such an alternative
could adversely affect issuers that employ traditional workers as
compared to issuers that employ both traditional and platform workers.
    The proposed amendments to Rule 12g5-1 would extend the exclusion
from the definition of securities ``held of record,'' and corresponding
safe harbor, to securities held by platform workers who receive them
pursuant to a compensation plan under the proposed amendments to Rule
701. Absent such proposed amendments, platform workers holding
compensatory securities of non-reporting issuers would be considered
holders of record. We believe that this would weaken the expected
economic benefits from the proposed amendments to Rule 701. Under such
an alternative, gig economy issuers may be disinclined to issue
compensatory securities to their platform workers to avoid being
subject to Exchange Act reporting requirements and the associated
compliance costs. The proposed amendments to Rule 12g5-1 are not
temporary. We could have proposed these amendments on a five-year
temporary basis. Such alternative would result in platform workers
holding compensatory securities becoming holders of record at the end
of the five-year period if the exemption were not extended. We believe
that under such alternative, gig economy issuers would be disinclined
to issue compensatory securities to their platform workers to avoid
being subject to Exchange Act reporting requirements and the associated
compliance costs, at the expiration of the five-year period.
Request for Comment
    We request comment on all aspects of our economic analysis,
including the potential costs and benefits of the proposed amendments
and alternatives thereto, and whether the proposed amendments, if
adopted, would promote efficiency, competition, and capital formation
or have an impact or burden on competition. Commenters are requested to
provide empirical data, estimation methodologies, and other factual
support for their views, in particular, on costs and benefits
estimates.
    In particular, we seek comment with respect to the following
questions: Are there any costs and benefits that are not identified or
are misidentified in the above analysis? Are there any effects on
efficiency, competition, and capital formation that are not identified
or are misidentified in the above analysis? Should we consider any of
the alternative approaches outlined above instead of the proposed
rules? Which approach and why? Are there any other alternative
approaches that we should consider? If so, what are they and what would
be the associated costs or benefits of these alternative approaches?

V. Paperwork Reduction Act

A. Summary of the Collection of Information

    Certain provisions of our rules and forms that would be affected by
the proposed amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\141\ The Commission is submitting the proposal to the Office
of Management and Budget (``OMB'') for review in accordance with the
PRA.\142\ The hours and costs associated with preparing and filing the
forms and reports constitute reporting and cost burdens imposed by each
collection of information. An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
requirement unless it displays a currently valid OMB control number.
Compliance with the information collections is mandatory. Responses to
the information collections are not kept confidential and there is no
mandatory retention period for the

information disclosed. The titles for the affected collections of
information are:
---------------------------------------------------------------------------

    \141\ See 44 U.S.C. 3501 et seq.
    \142\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

     ``Form S-8'' (OMB Control No. 3235-0066); and
     ``Rule 701'' (OMB Control No. 3235-0522).
    We adopted Form S-8 and Rule 701 pursuant to the Securities Act.
Form S-8 sets forth the disclosure requirements for a registration
statement for securities to be offered by a registrant under an
employee benefit plan to its employees, or employees of a subsidiary or
parent company, to help such investors make informed investment
decisions. Rule 701 provides an exemption from registration for offers
and sales of securities pursuant to certain compensatory benefit plans
and contracts relating to compensation. Issuers conducting compensatory
benefit plan offerings in excess of $10 million in reliance on Rule 701
during any consecutive 12-month period are required to provide plan
participants with certain disclosures, including financial statement
disclosures.\143\ This disclosure constitutes a collection of
information. A description of the proposed rule amendments, including
the need for the information and its proposed use, as well as a
description of the likely respondents, can be found in Section II
above, and a discussion of the economic effects of the proposed
amendments can be found in Section IV above.
---------------------------------------------------------------------------

    \143\ See 17 CFR 230.701(e).
---------------------------------------------------------------------------

B. Summary of the Proposed Amendments' Effects on the Collections of
Information

    The following table summarizes the estimated effects of the
proposed amendments on the paperwork burdens associated with the
affected collections of information.

                   PRA Table 1--Estimated Paperwork Burden Effects of the Proposed Amendments
----------------------------------------------------------------------------------------------------------------
                                                                                Estimated  increase
    Collection of                               Expected estimated     Current  number of       in  number of
     information         Proposed amendment       PRA effect of          average annual        average annual
                                                proposed amendment         responses           respondents \1\
----------------------------------------------------------------------------------------------------------------
Form S-8.............   Would          Expected to    2,140.......   17
                        temporarily expand     increase the average
                        the scope of Form S-   annual number of
                        8 to include           Form S-8s filed
                        issuances to a         during the temporary
                        registrant's           4-year period.
                        platform workers in
                        addition to its
                        employees.
                        Issuers        Expected to    0...........   17
                        would be required to   increase PRA burden
                        furnish certain        by 2 hours per
                        information every      affected respondent
                        six months.            annually (i.e., 1
                                               hour for each semi-
                                               annual response).
Rule 701.............   Would          Expected to    800.........   6
                        temporarily expand     increase average
                        the scope of Rule      annual number of
                        701 to exempt          issuers required to
                        issuances to an        provide Rule 701(e)
                        issuer's platform      disclosure because
                        workers in addition    offers and sales to
                        to its employees.      platform workers
                                               would be integrated
                                               with offers and
                                               sales to employees
                                               for purpose of
                                               determining whether
                                               an issuer has
                                               exceeded the $10
                                               million threshold
                                               under Rule 701(e).
                        Issuers        Expected to    0...........   105
                        would be required to   increase PRA burden
                        furnish certain        by 3 hours per
                        information every      affected respondent
                        six months.            annually (i.e., 1.5
                                               hours for each semi-
                                               annual response) \2\.
----------------------------------------------------------------------------------------------------------------
\1\ These estimates are based on the Farrell study, which identified 106 companies making payments to online
  platform workers providing services during 2012-2018. See supra Section IV.A, note 119 and accompanying text.
  The staff updated this study's findings using an assumed growth rate of 15 percent for such companies in 2019,
  which yielded an estimate of 122 companies making payments to platform workers as of calendar year-end 2019.
  Upon a review of Commission filings, the staff estimated that 17 of those companies are public, and 105
  private. The staff further estimated that 5 percent of those private companies (six companies) would likely
  exceed the $10,000,000 threshold for aggregate annual securities offerings to its employees and platform
  workers and would be required to provide the disclosure pursuant to Rule 701(e). In making this estimate, the
  staff relied on the PRA estimates in Release No. 33-10520, which increased the Rule 701(e) disclosure
  threshold from $5,000,000 to $10,000,000.
\2\ We estimate a greater increase in the PRA burden for Rule 701(h)'s furnished disclosure provision because it
  would solicit more information compared to the similar proposed provision for Form S-8.

C. Incremental and Aggregate Burden and Cost Estimates for the Proposed
Amendments

    Below we estimate the incremental and aggregate increase in
paperwork burden as a result of the proposed amendments. These
estimates represent the average burden for all issuers, both large and
small. In deriving our estimates, we recognize that the burdens will
likely vary among individual issuers based on a number of factors,
including the nature of their business. For purposes of the PRA, the
burden is to be allocated between internal burden hours and outside
professional costs. The table below sets forth the percentage estimates
we typically use for the burden allocation for each affected collection
of information. We also estimate that the average cost of retaining
outside professionals is $400 per hour.\144\
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    \144\ We recognize that the costs of retaining outside
professionals may vary depending on the nature of the professional
services, but for purposes of this PRA analysis, we estimate that
such costs would be an average of $400 per hour. This estimate is
based on consultations with several registrants, law firms, and
other persons who regularly assist registrants in preparing and
filing reports with the Commission.

     PRA Table 2--Standard Estimated Burden Allocation for Specified
                       Collections of Information
------------------------------------------------------------------------
                                                             Outside
      Collection of information         Internal (%)      professionals
                                                               (%)
------------------------------------------------------------------------
Form S-8............................                50                50
Rule 701............................                25                75
------------------------------------------------------------------------

    We estimate that the proposed amendments would change both the
frequency of responses to, and the burden per response of, the existing
collections of information. The burden increase estimates were
calculated by multiplying the estimated increased number of responses
by the increased estimated average amount of time it would take to
prepare and review the disclosure required under the affected
collection of information. The table below illustrates the incremental
change to the annual compliance burden of the affected collection of
information, in hours and in costs.

           PRA Table 3--Calculation of the Incremental Change in Burden Estimates of Current Responses Resulting From the Proposed Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Burden hour                     Increase in     Increase in     Increase in
                                                             Number of        annual        Increase in      internal      professional    professional
               Collection of  information                    estimated     increase per    burden hours    burden hours      hours for      costs  for
                                                             affected        affected      for affected    for affected      affected        affected
                                                            respondents     respondent      respondents     respondents     respondents     respondents
                                                                     (A)             (B)     (C) = (A) x     (D) = (C) x     (E) = (C) x     (F) = (E) x
                                                                                (B)     0.5 or 0.25     0.5 or 0.75            $400
--------------------------------------------------------------------------------------------------------------------------------------------------------
S-8 (including furnished disclosure)....................              17          \1\ 29             493           246.5           246.5         $98,600
Rule 701(e) + Rule 701(h) furnished disclosure..........               6           \2\ 5              30             7.5            22.5           9,000
Rule 701 (only furnished disclosure)....................              99               3             297           74.25          222.75          89,100
                                                         -----------------------------------------------------------------------------------------------
    Rule 701 (total)....................................             105  ..............             327           81.75          245.25          98,100
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Based on the current OMB inventory of 27 annual burden hours per response + 1 burden hour for each semi-annual required furnished disclosure (2
  additional annual burden hours) = an increase of 29 burden hours per response.
\2\ Based on the current OMB inventory of 2 annual burden hours per response + 1.5 burden hours for each semi- annual required furnished disclosure (3
  additional annual burden hours) = an increase of 5 burden hours per response.

    The table below illustrates the program change expected to result
from the proposed rule amendments together with the total requested
change in reporting burden and costs.

                                                              PRA Table 4--Requested Paperwork Burden Under the Proposed Amendments
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Current burden                                  Program change                            Requested change in burden
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
            Collection of information                                                                Number of                       Change in       Requested       Requested
                                                  Current annual  Current burden   Current cost      affected       Change  in     professional       annual       burden  hours    Cost burden
                                                     responses         Hours          burden         responses     issuer  hours       costs         responses          \1\
                                                             (A)             (B)             (C)             (D)             (E)             (F)             (G)     (H) = (B) +     (I) = (C) +
                                                                                (E)             (F)
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
S-8.............................................           2,140          28,890     $11,556,000              17           246.5         $98,600           2,157          29,137     $11,654,600
Rule 701........................................             800             400        $480,000             105           81.75         $98,100             905         \2\ 482        $578,100
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Rounded to nearest whole number.
\2\ Thus, the estimated change in internal burden would result in an annual internal burden per response of 2.13 hours, which is a slight increase in the current annual internal burden of 2
  hours. 482/.25 = 1,928; 1,928/905 = 2.13.

D. Request for Comment

    We request comment in order to:
     Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information would have practical utility;
     Evaluate the accuracy of our estimate of the burden of the
proposed collection of information;
     Determine whether there are ways to enhance the quality,
utility, and clarity of the information to be collected;
     Evaluate whether there are ways to minimize the burden of
the collection of information on those who are to respond, including
through the use of automated collection techniques or other forms of
information technology; and
     Evaluate whether the proposed amendments would have any
effects on any other collections of information not previously
identified in this section.\145\
---------------------------------------------------------------------------

    \145\ We request comment pursuant to 44 U.S.C. 3506(c)(2)(B).
---------------------------------------------------------------------------

    Any member of the public may direct to us any comments about the
accuracy of these burden estimates and any suggestions for reducing
these burdens. Persons submitting comments on the collection of
information requirements should direct the comments to the Office of
Management and Budget,

Attention: Desk Officer for the Securities and Exchange Commission,
Office of Information and Regulatory Affairs, Washington, DC 20503, and
should send a copy to Vanessa A. Countryman, Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549-1090, with
reference to File No. S7-19-20. Requests for materials submitted to OMB
by the Commission with regard to these collections of information
should be in writing, refer to File No. S7-19-20, and be submitted to
the Securities and Exchange Commission, Office of FOIA Services, 100 F
Street NE, Washington, DC 20549-2736. OMB is required to make a
decision concerning the collection of information between 30 and 60
days after publication of this release. Consequently, a comment to OMB
is best assured of having its full effect if OMB receives it within 30
days of publication.

VI. Initial Regulatory Flexibility Act Analysis

    This Initial Regulatory Flexibility Act Analysis (``IRFA'') has
been prepared, and made available for public comment, in accordance
with the Regulatory Flexibility Act (``RFA'').\146\ It relates to the
proposed amendments to Securities Act Rule 701 and Form S-8 to permit
the offer and sale of securities to internet platform workers, subject
to specified conditions, for a temporary, five-year period. The
Commission also is proposing to amend Exchange Act Rule 12g5-1 to
exclude from the definition of ``held of record'' securities held by
platform workers who received them pursuant to a compensation plan
under proposed Rule 701(h) and to provide a safe harbor for issuers in
connection with such exclusion. Neither the proposed exclusion nor the
corresponding safe harbor would be temporary. As required by the RFA,
this IRFA describes the impact of these proposed amendments on small
entities.\147\
---------------------------------------------------------------------------

    \146\ 5 U.S.C. 601 et seq.
    \147\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

A. Reasons for, and Objectives of, the Proposed Action

    The proposed amendments would expand the scope of Rule 701 and Form
S-8 to address recent changes in the workforce caused by the rise of
the ``gig economy'' by permitting the issuance of securities to an
issuer's platform workers, in addition to its employees, for
compensatory purposes. The proposed amendments would include conditions
designed to limit the possibility of the changes to Rule 701 and Form
S-8 resulting in offers and sales for capital-raising purposes. The
proposed amendments to Rule 701 and Form S-8 would be temporary to
enable the Commission to assess whether issuances of securities to
platform workers are being made for legitimate compensatory purposes,
and not for capital-raising purposes, and whether such issuances have
the expected beneficial effects for issuers in the ``gig economy'' and
their investors.
    The proposed amendments to Exchange Act Rule 12g5-1 would extend
the exclusion from the definition of ``held of record'' and safe
harbor, for purposes of Section 12(g), which currently applies to
securities held by persons who received them pursuant to an employee
compensation plan, to securities held by platform workers pursuant to a
compensation plan under proposed Rule 701(h). The proposed amendments
to Rule 12g5-1, which would not be temporary, are intended to remove a
potential disincentive to the issuance of securities as compensation to
platform workers and to avoid favoring issuers that do not have
platform workers over issuers that have them. The reasons for, and
objectives of, all of the proposed amendments are discussed in more
detail in Sections II.A. through II.F., above.

B. Legal Basis

    We are proposing the amendments contained in this release under the
authority set forth in Sections 7, 10, and 19(a) of the Securities Act,
as amended, and Sections 3(b), 12, 13, 15, 23(a), and 36 of the
Exchange Act, as amended.

C. Small Entities Subject to the Proposed Rules

    The proposed changes would affect some issuers that are small
entities. The RFA defines ``small entity'' to mean ``small business,''
``small organization,'' or ``small governmental jurisdiction.'' \148\
For purposes of the RFA, under 17 CFR 240.0-10(a), an issuer, other
than an investment company, is 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 and, under 17 CFR 230.157, is also
engaged or proposing to engage in an offering of securities that does
not exceed $5 million.
---------------------------------------------------------------------------

    \148\ 5 U.S.C. 601(6).
---------------------------------------------------------------------------

    The proposed amendments would apply only to issuers whose platform
workers provide services; they would not apply to issuers whose
platform workers are providing goods. We estimate that there are only a
limited number of companies with platforms providing services that
would be affected by the proposed rules.\149\ Although it is possible
that the proposed amendment to Form S-8 could cause a small entity to
file a Form S-8 for the issuance of securities to its platform workers,
based upon staff review of Commission filings during 2018-2019, and due
to the resulting burden and expense, we do not believe that this
outcome is likely.\150\ There is, however, a lack of information
concerning the assets of potentially affected private companies, and as
such, it is difficult to estimate with certainty the number of private
issuers that qualify as small entities that would be eligible to rely
on the proposed amendments to Rule 701 and Rule 12g5-1 or that would
choose to become public companies and then rely on the proposed
amendments to Form S-8. We therefore are soliciting comment on the
number of small entities that would be affected by the proposed
amendments.
---------------------------------------------------------------------------

    \149\ Based upon a review of Commission filings and other
relevant data, the staff estimated that the proposed rules would
affect 122 companies, 17 of which are public and 105 of which are
private. See supra Section V.B.
    \150\ None of the 17 Forms S-8 filed by issuers with service-
providing platforms were small entities.
---------------------------------------------------------------------------

D. Reporting, Recordkeeping, and Other Compliance Requirements

    As noted above, the purpose of the proposed amendments is to permit
the issuance of securities for compensatory purposes under Rule 701 and
Form S-8 to a new category of worker, the ``platform worker.'' By
expanding the scope of Rule 701 to include issuances of unregistered
securities to a non-reporting issuer's platform workers, the proposed
amendments likely would result in cost savings for such an issuer,
which would otherwise have to incur the costs of registering the
securities, absent another exemption from registration, and thereby
become an Exchange Act reporting issuer. In addition, by extending the
current exclusion and safe harbor under Exchange Act Rule 12g5-1 to
securities held by platform workers who received them pursuant to a
compensation plan under the proposed Rule 701 amendment, a non-
reporting issuer would benefit by not being required to count those
platform workers as record holders for the purpose of determining its
Section 12(g) registration obligations.
    We believe that the proposed amendments to Rule 701 and Rule 12g5-1
could be of particular benefit to small entities, which may be
financially constrained, by enabling them to issue securities as
compensation, instead of

cash, within the proposed limits. This could help small entities
attract potential workers and enhance their competitive position.
    In contrast, we do not believe that the compliance costs of the
proposed Rule 701 amendment would be significant. The most significant
compliance burden under current Rule 701 is the financial disclosure
requirement under Rule 701(e) for issuers that exceed the $10 million
threshold during a 12-month period. Due to the $10 million threshold,
this requirement would not apply to small entities.\151\ Moreover,
although under the proposed rules, an issuer offering securities to its
platform workers pursuant to the amended Rule 701 would be required to
furnish certain information every six months, we do not expect the
resulting compliance burden to be significant.\152\
---------------------------------------------------------------------------

    \151\ See 17 CFR 230.701(d), which limits the aggregate sales
price or amount of securities sold under Rule 701 during any
consecutive 12-month period to the greatest of $1,000,000, 15
percent of the total assets of the issuer, or 15 percent of the
outstanding amount of the class of securities being offered and sold
in reliance on Rule 701. The purpose of the Rule 701(d) caps is to
help curb non-compensatory sales in reliance on the rule. For
example, applying the asset cap, a small entity would only be able
to offer 15 percent of $5,000,000, or $750,000 during a consecutive
12-month period. Although in a companion rulemaking, the Commission
is proposing to increase the asset limitation to 25 percent, under
this increased limit, if adopted, a small entity would still be able
to offer only 25 percent of $5,000,000, or $1,250,000. While the
Commission is also proposing to raise the dollar cap, the new cap
would only increase to $2,000,000. See Release No. 33-10891 at
Section II.B.
    \152\ We estimate that the compliance burden associated with
furnishing the required information under the proposed Rule 701
amendment would be 1.5 hours for each semi-annual disclosure per
issuer, or a total of 3 hours per issuer on an annual basis. See
supra Section V.B.
---------------------------------------------------------------------------

    The proposed amendment to Form S-8 would benefit public companies
with platforms offering services by permitting them to issue registered
securities to their platform workers in addition to their employees,
which could enhance their competitive position vis-[agrave]-vis
companies that only have employees. The proposed amendments likely
would result in the filing of additional Form S-8 registration
statements to cover offers and sales to such workers. Those registrants
would incur the compliance burden and costs typically associated with
preparing and filing Form S-8. In addition, because we are proposing a
requirement to furnish information every six months for Form S-8
issuers, similar to the proposal for Rule 701 issuers, those
registrants would incur the compliance burden and costs associated with
furnishing the required information, which we similarly estimate would
not be significant.\153\ Although it is possible that the proposed
amendment to Form S-8 could cause a small entity to file a Form S-8 for
the issuance of securities to its platform workers, based upon staff
review of Commission filings during 2018-2019, and due to the resulting
burden and expense, we do not believe that this outcome is likely.\154\
Nevertheless, we are soliciting comment on the costs and benefits of
the proposed amendments for small entities.
---------------------------------------------------------------------------

    \153\ We estimate that the compliance burden associated with
furnishing the required information under the proposed Form S-8
amendment would be 1.0 hours for each semi-annual disclosure per
issuer, or a total of 2 hours per issuer on an annual basis. See
supra Section V.B.
    \154\ See supra note 150.
---------------------------------------------------------------------------

    Compliance with the proposed amendments would require the use of
professional skills, including legal skills, both to help ensure that
an issuer has met the proposed conditions under Rule 701 designed to
prevent the issuance of securities for a capital-raising purpose, and
to enable a registrant to meet the requirements of Form S-8. We discuss
the economic impact, including the estimated compliance burdens and
costs, of the proposed amendments to all issuers, including small
entities, in greater detail in Sections IV and V above.

E. Duplicative, Overlapping, or Conflicting Federal Rules

    We believe that the proposed amendments would not duplicate,
overlap, or conflict with other Federal rules.

F. Significant Alternatives

    The RFA directs us to consider alternatives that would accomplish
our stated objectives, while minimizing any significant economic impact
on small entities. In connection with the proposed amendments, we
considered the following alternatives:
     Establishing different compliance or reporting
requirements that take into account the resources available to small
entities;
     Clarifying, consolidating, or simplifying compliance and
reporting requirements under the rules for small entities;
     Using performance rather than design standards; and
     Exempting small entities from all or part of the
requirements.
    The proposed amendments to Rule 701 and Form S-8 would permit the
issuance of securities to platform workers subject to specified
conditions. Although an issuer, including a small entity, would incur
some compliance costs to ensure that it has met those conditions,
issuers proceeding under the proposed amendment to Rule 701 would
largely benefit due to the savings derived from not having to register
the securities. In addition, we expect the increase in Form S-8
compliance costs to be limited because, although the proposed amendment
to Form S-8 would likely result in more registration statements on that
form being filed, we believe that the proposed amendment would only
slightly increase the actual burden of preparing and filing each Form
S-8. We also believe that it is unlikely that the proposed amendment
would result in a small entity filing a Form S-8. We are not proposing
an amendment to reduce the costs of preparing and filing a Form S-8
because we believe the requirements that result in those costs are
necessary to protect investors. We also are not proposing to exempt
small entities from the costs associated with the proposed requirement
to furnish information on a semi-annual basis because we believe that
requirement is necessary to assess fully the impact of the temporary
rules. Accordingly, we do not believe it is necessary to establish
different compliance or reporting requirements for small entities or to
exempt small entities from all or part of the proposed amendments.
    Finally, with respect to using performance rather than design
standards, the proposed amendments generally contain elements similar
to performance standards. For example, the proposed definition of
platform worker would include the condition that the issuer operates
the platform for the provision of services pursuant to a written
contract or agreement between the issuer and the platform worker under
which the issuer controls the use of the platform. Issuer control would
be demonstrated by the issuer being able to establish the amount of the
fees charged for using the platform and the terms and conditions by
which the platform worker receives payment for the services provided
through the platform. In addition, the issuer must have the authority
to accept and remove the internet platform workers providing services
through the platform. However, the proposed amendments would not
require that a specific fee be charged or that a specific payment
mechanism be utilized. The proposed amendments would also not limit
what services an issuer could facilitate through its platform or how
participating workers could provide the services.

Request for Comment
    We encourage the submission of comments with respect to any aspect
of this IRFA. In particular, we request comments regarding:
     How the proposed rule and form amendments can achieve
their objective while lowering the burden on small entities;
     The number of small entity companies that may be affected
by the proposed rule and form amendments;
     The existence or nature of the potential effects of the
proposed amendments on small entity companies discussed in the
analysis;
     How to quantify the effects of the proposed amendments;
and
     Whether there are any federal rules that duplicate,
overlap, or conflict with the proposed amendments.
    Commenters are asked to describe the nature of any effect and
provide empirical data supporting the extent of that effect. Comments
will be considered in the preparation of the Final Regulatory
Flexibility Analysis, if the proposed rules are adopted, and will be
placed in the same public file as comments on the proposed rules
themselves.

VII. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996 (``SBREFA''),\155\ the Commission must advise OMB as to
whether the proposed amendments constitute a ``major'' rule. Under
SBREFA, a rule is considered ``major'' where, if adopted, it results in
or is likely to result in:
---------------------------------------------------------------------------

    \155\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

     An annual effect on the U.S. economy of $100 million or
more;
     A major increase in costs or prices for consumers or
individual industries; or
     Significant adverse effects on competition, investment, or
innovation.
    We request comment on whether our proposal would be a ``major
rule'' for purposes of SBREFA. In particular, we request comment and
empirical data on:
     The potential effect on the U.S. economy on an annual
basis;
     Any potential increase in costs or prices for consumers or
individual industries; and
     Any potential effect on competition, investment, or
innovation.

VIII. Statutory Authority

    The amendments contained in this release are being proposed under
the authority set forth in Sections 7, 10, and 19(a) of the Securities
Act, as amended, and Sections 3(b), 12, 13, 15, 23(a), and 36 of the
Exchange Act.

List of Subjects in 17 CFR Parts 230, 239, and 240

    Reporting and recordkeeping requirements, Securities.

Text of the Proposed Amendments

    For the reasons set out in the preamble, the Commission is
proposing to amend 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, 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, 80a29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126
Stat. 313 (2012), unless otherwise noted.
* * * * *
    Sections 230.400 to 230.499 issued under secs. 6, 8, 10, 19, 48
Stat. 78, 79, 81, and 85, as amended (15 U.S.C. 77f, 77h, 77j, 77s).
* * * * *
0
2. Amend Sec.  230.428 by adding paragraph (d) to read as follows:

Sec.  230.428   Documents constituting a section 10(a) prospectus for
Form S-8 registration statement; requirements relating to offerings of
securities registered on Form S-8.

* * * * *
    (d)(1) Where securities are to be offered to platform workers
pursuant to a registration statement on Form S-8 (Sec.  239.16b(c)),
the documents and other information identified in paragraph (a) of this
section shall, taken together, constitute a Section 10(a) prospectus
for offerings to platform workers pursuant to a written compensation
plan, contract, or agreement. The document retention requirements in
paragraph (a)(2) of this section and the delivery, updating, and
related procedural requirements in paragraph (b) of this section shall
also apply to such offerings to platform workers.
    (2) This paragraph (d) will expire on the same date that 17 CFR
239.16b(c) will expire pursuant to 17 CFR 239.16b(c)(4).
0
3. Amend Sec.  230.701 by adding Note 1 to paragraph (c) and adding
paragraph (h) to read as follows:

Sec.  230.701   Exemption for offers and sales of securities pursuant
to certain compensatory benefit plans and contracts relating to
compensation.

* * * * *
    (c) * * *

    Note 1 to paragraph (c):  Refer to Sec.  230.701(h) for the
exemption under Sec.  230.701 applicable to offers and sales of
securities to platform workers. Platform worker is defined in Sec.
230.701(h)(2).

* * * * *
    (h)(1) Transactions with platform workers. (i) In addition to the
transactions exempted by paragraph (c) of this section, this section
exempts offers and sales of securities (including plan interests and
guarantees pursuant to paragraph (d)(2)(ii) of this section) under a
written compensatory benefit plan (or written compensation contract)
established by the issuer, its parents, its subsidiaries, or
subsidiaries of the issuer's parent, for the participation of platform
workers as defined in paragraph (h)(2) of this section. As used in this
section, the term ``platform worker'' includes former platform workers,
executors, administrators, or beneficiaries of the estates of deceased
platform workers, guardians or members of a committee for incompetent
former platform workers, or similar persons duly authorized by law to
administer the estate or assets of former platform workers. This
section exempts offers and sales to former platform workers only if
such workers met the conditions of paragraph (h) of this section at the
time the securities were offered or during a period of service ending
within 12 months preceding the termination of service for which the
securities were issued. This section also exempts offers and sales to
former platform workers of an acquired entity of securities issued in
substitution or exchange for securities issued to such workers by the
acquired entity on a compensatory basis while such persons were
providing services to the acquired entity.
    (ii) The exemption for offers and sales of securities to platform
workers under this section is temporary and will expire pursuant to
paragraph (h)(6) of this section, except that, following the expiration
date specified in paragraph (h)(6) of this section, an issuer may
continue to rely on the exemption in this paragraph (h) for the sale of
securities underlying options, warrants, or rights previously issued in
an exempt transaction pursuant to this paragraph (h).
    (2) Definition of platform worker. A platform worker is a natural
person or an entity specified in paragraph (h)(2)(iii) of this section,
who is unaffiliated with the issuer and meets the following conditions:
    (i) The worker provides bona fide services to the issuer (or the
issuer's parents, the issuer's subsidiaries or subsidiaries of the
issuer's parent) or to third-party end-users, and such services

benefit the issuer. Selling or transferring permanent ownership of
discrete, tangible goods would not constitute services for purposes of
this section;
    (ii) The services are provided pursuant to a written contract or
agreement between the issuer and the worker and are provided through an
internet-based platform or other widespread, technology-based
marketplace platform or system that the issuer operates and controls,
as demonstrated by the following:
    (A) The issuer provides access to the platform and establishes the
principal terms of service for using the platform;
    (B) The issuer establishes the terms and conditions by which the
platform worker receives payment for the services provided through the
platform; and
    (C) The issuer can accept and remove the platform worker.
    (iii) A platform worker may be an entity if:
    (A) Substantially all of its activities involve the performance of
bona fide services that meet the requirements of paragraphs (h)(2) and
(h)(3) of this section; and
    (B) The ownership interest of the entity is wholly and directly
held by the
    natural person performing the services pursuant to paragraph (h) of
this section through the entity.
    (3) Additional requirements for issuances to platform workers.
Offers and sales of securities to platform workers are eligible for an
exemption under this section if the following, additional requirements
are met:
    (i) The issuance is pursuant to a compensatory arrangement, as
evidenced by a written compensation plan, contract, or agreement, and
is not for services that are in connection with the offer or sale of
securities in a capital-raising transaction, or services that directly
or indirectly promote or maintain a market for the issuer's securities;
    (ii) No more than 15 percent of the value of compensation received
by a platform worker from the issuer for services provided during a
consecutive 12-month period, and no more than $75,000 of the value of
compensation received by the platform worker from the issuer during a
consecutive 36-month period, shall consist of securities, with such
value determined at the time the securities are granted;
    (iii) The amount and terms of any securities issued to a platform
worker may not be subject to individual bargaining or the worker's
ability to elect between payment in securities or cash; and
    (iv) The issuer must take reasonable steps to prohibit the transfer
of the securities issued to a platform worker pursuant to this
exemption, other than a transfer to the issuer or by operation of law,
except that 90 days after the issuer becomes subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m
or 78o(d)), securities issued under this section may be resold pursuant
to paragraph (g)(3) of this section.
    (4) Requirement to furnish certain information. An issuer using the
exemption under this section for the issuance of securities to platform
workers is required to furnish the following information to the
Commission at six-month intervals commencing six months after the first
such issuance:
    (i) The criteria used to determine eligibility for securities
awards to platform workers, whether they are the same as for other
compensatory transactions and whether those criteria, including
revisions to the criteria, are communicated to workers in advance as an
incentive;
    (ii) The type and terms of securities issued to platform workers
during each six-month interval, and whether they are the same as for
other compensatory transactions by the issuer during that interval;
    (iii) The reasonable steps taken to prohibit the transfer of the
securities sold pursuant to this paragraph (h);
    (iv) The percentage of overall outstanding securities that the
amount issued cumulatively under this paragraph (h) represents;
    (v) During each six-month interval, the number of platform workers,
the number of non-platform workers, the number of platform workers
receiving securities pursuant to this paragraph (h), and the number of
non-platform workers who received securities pursuant to Sec.  230.701;
and
    (vi) The number and dollar amount of securities issued to platform
workers in each six-month interval, both in absolute amounts and as a
percentage of the issuer's total exempt sales under Sec.  230.701.
    Instruction to Sec.  230.701(h)(4). An issuer should furnish the
required information specified in this paragraph in the manner
designated by the Division of Corporation Finance for this purpose.
    (5) Request for confidential treatment. An issuer may request
confidential treatment under Sec.  200.83 for information furnished
pursuant to paragraph (h)(3) of this section. Written requests for
confidential treatment under Sec.  200.83 relating to the furnished
materials may be submitted either in paper format or electronically.
    (6) Expiration of temporary exemptive rule. Except as provided in
paragraph (h)(1)(ii) of this section, the exemption for the issuance of
securities to platform workers pursuant to this paragraph (h) applies
only to offers or sales of securities occurring prior to five years
following the date of the section's effectiveness.
    (7) This paragraph (h) will expire five years from the date of
effectiveness of Sec.  230.701(h).

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
4. The general authority citation for part 239 continues to read as
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-
3, 77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a),
78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24,
80a-26, 80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106,
126 Stat. 312, unless otherwise noted.
* * * * *
0
5. Amend Sec.  239.16b by adding ``or other compensatory plans'' at the
end of the title and adding paragraphs (a)(3) and (c) to read as
follows:

Sec.  239.16b  Form S-8, for registration under the Securities Act of
1933 of securities to be offered to employees pursuant to employee
benefit plans or other compensatory plans.

    (a) * * *
    (3) Securities of the registrant to be offered to marketplace
platform workers pursuant to Sec.  239.16b(c).
* * * * *
    (c) Issuances to platform workers. (1) A registrant may register on
Form S-8 securities to be offered or sold to platform workers, as
defined by Sec.  230.701(h), for the temporary period set forth in
Sec.  239.16b(c)(4), only if:
    (i) The issuance is pursuant to a compensatory arrangement, as
evidenced by a written compensation plan, contract or agreement, and is
not for services that are in connection with the offer or sale of
securities in a capital-raising transaction or that directly or
indirectly promote or maintain a market for the issuer's securities;
    (ii) No more than 15 percent of the value of compensation received
by a platform worker from the issuer for services provided during a
consecutive 12-month period shall consist of securities, with such
value determined at the time the securities are granted, with the
remainder of compensation received by the platform worker from the
issuer paid in cash, and no more than $75,000 of such compensation
received from the issuer during a

consecutive 36-month period shall consist of securities, with such
value determined at the time the securities are granted; and
    (iii) The amount and terms of any securities issued to a platform
worker may not be subject to individual bargaining or the worker's
ability to elect between payment in securities or cash.
    (2) A registrant using Form S-8 for the issuance of securities to
platform workers is required to furnish the following information in
the manner designated by the Division of Corporation Finance for this
purpose at six-month intervals commencing six months after the first
such issuance:
    (i) The criteria used to determine eligibility for securities
awards to platform workers, whether they are the same as the criteria
for other compensatory transactions, and whether those criteria,
including revisions to the criteria, are communicated to workers in
advance as an incentive;
    (ii) The type and terms of securities issued to platform workers
during each six-month interval and whether they are the same as for
other compensatory transactions by the registrant during that interval;
    (iii) The percentage of overall outstanding securities that the
amount issued cumulatively to platform workers under this section
represents;
    (iv) During each six-month interval, the number of platform
workers, the number of non-platform workers, the number of platform
workers receiving securities registered on Form S-8, and the number of
non-platform workers who received securities registered on Form S-8;
    (v) The number of platform workers, in an absolute amount and as a
percentage of the total number of platform workers, employees, and
other persons eligible to receive securities on Form S-8; and
    (vi) The number and dollar amount of securities issued to platform
workers, both in absolute amounts and as a percentage of the issuer's
total sales on Form S-8 during each six-month interval.
    (3) A registrant may request confidential treatment under Sec.
200.83 for information furnished pursuant to this section. Written
requests for confidential treatment under Sec.  200.83 relating to the
furnished materials may be submitted either in paper format or
electronically.
    (4) This paragraph (c) applies only to offers or issuances of
securities occurring prior to five years from the date of the section's
effectiveness.
    (5) This paragraph (c) will expire five years from the date of
effectiveness of Sec.  239.16b(c).
0
6. Amend Form S-8 (referenced in Sec.  239.16b) by:
0
a. Redesignating paragraph (b) of General Instruction A.1. as paragraph
(c);
0
b. Adding paragraph (b) of General Instruction A.1.;
0
c. Revising paragraph 1 of General Instruction G. (``Updating'');
0
d. Revising the Note immediately following the heading ``Part I--
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS;''
0
e. Revising Item 2 of Part I; and
0
f. Revising the ``Signatures'' section for ``the Plan'' by replacing
the parenthetical ``or other persons who administer the employee
benefit plan'' with ``or other persons who administer the plan'' in the
first sentence.
    The additions and revisions read as follows:

    Note: The text of Form S-8 does not, and this amendment will
not, appear in the Code of Federal Regulations.

United States Securities and Exchange Commission Washington, DC 20549

Form S-8 Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

A. Rule as to Use of Form S-8

    1. * * *
    (a) * * *
    (b)(1) Securities of the registrant to be offered to platform
workers pursuant to a written compensation plan, contract, or
agreement. The term ``platform worker'' is defined by Rule 701(h)(2)
(Sec.  230.701(h)(2)). As used in this form, the term ``plan'' includes
a written compensation plan, contract, or agreement for the issuance of
securities to platform workers.
    (2) Form S-8 is available for the issuance of securities to
platform workers only if, pursuant to Sec.  239.16b(c):
    (i) The issuance is pursuant to a compensatory arrangement, as
evidenced by a written compensation plan, contract, or agreement, and
is not for services that are in connection with the offer or sale of
securities in a capital-raising transaction, or services that directly
or indirectly promote or maintain a market for the issuer's securities;
    (ii) No more than 15 percent of the value of compensation received
by a platform worker from the issuer for services provided during a
consecutive 12-month period shall consist of securities, with such
value determined at the time the securities are granted, with the
remainder of compensation received by the platform worker from the
issuer paid in cash, and no more than $75,000 of such compensation
received from the issuer during a consecutive 36-month period shall
consist of securities, with such value determined at the time the
securities are granted;
    (iii) The amount and terms of any securities issued to a platform
worker may not be subject to individual bargaining or the worker's
ability to elect between payment in securities or cash; and
    (iv) The offers or sales of securities occur prior to five years
from the date of the effectiveness of Sec.  239.16b(c)]. On that date,
Sec.  239.16b(c) will expire and will no longer be effective.
    Note: The purpose of Sec.  239.16b(c) is to permit the issuance of
securities to platform workers for a compensatory purpose. This section
is not available for plans or schemes to circumvent this purpose, such
as to raise capital. This section also is not available to any
transaction that is in technical compliance with Sec.  239.16b(c) but
is part of a plan or scheme to evade the compensatory purpose of this
section.
    (3) A registrant using Form S-8 for the issuance of securities to
platform workers is required to furnish the information specified in
Sec.  239.16b(c)(3) in the manner designated by the Division of
Corporation Finance for this purpose at six-month intervals commencing
six months after the first issuance of securities to platform workers
on this form.
    Note: A registrant may request confidential treatment under Sec.
200.83 for information furnished pursuant to Sec.  239.16b(c)(3).
Written requests for confidential treatment under Sec.  200.83 relating
to the furnished materials may be submitted either in paper format or
electronically.
    (4) The term ``platform worker'' includes:
    (i) Former platform workers, only if such workers provided services
pursuant to Sec.  239.16b(c) of this chapter at the time the securities
were offered or during a period of service ending within 12 months
preceding the termination of service for which the securities were
issued;
    (ii) Former platform workers of an entity acquired by the issuer
who may receive securities registered on this form in substitution or
exchange for securities issued to them by the acquired entity on a
compensatory basis

while such persons were providing services to the acquired entity; and
    (iii) Executors, administrators, or beneficiaries of the estates of
deceased platform workers, guardians or members of a committee for
incompetent former platform workers, or similar persons duly authorized
by law to administer the estate or assets of former platform workers.
    (5) The inclusion of individuals described in paragraph (4) of
General Instruction A.1.(b) in the term ``platform worker'' is only to
permit registration on Form S-8 of the exercise of stock options issued
to platform workers pursuant to a plan, and the subsequent sale of the
securities, if these exercises and sales are permitted under the terms
of the plan.
* * * * *

G. Updating

    Updating of information constituting the Section 10(a) prospectus
pursuant to Rule 428(a) (Sec.  230.428(a)) during the offering of the
securities shall be accomplished as follows:
    1. Plan information specified by Item 1 of Form S-8 required to be
sent or given to employees or platform workers shall be updated as
specified in Rule 428(b)(l) (Sec.  230.428(b)(l)) or Rule 428(d)(1)
(Sec.  230.428(d)(1)). Such information need not be filed with the
Commission.
* * * * *

Part I Information Required in the Section 10(a) Prospectus

    Note: The document(s) containing the information specified in this
Part I will be sent or given to employees or platform workers as
specified by Rules 428(b)(1) and 428(d) (Sec. Sec.  230.428(b)(1) and
428(d)). Such documents need not be filed with the Commission either as
part of this registration statement or as prospectuses or prospectus
supplements pursuant to Rule 424 (Sec.  230.424). These documents and
the documents incorporated by reference in the registration statement
pursuant to Item 3 of Part II of this Form, taken together, constitute
a prospectus that meets the requirements of Section 10(a) of the
Securities Act. See Rules 428(b)(1) and 428(d) (Sec. Sec.
230.428(b)(1) and 428(d)).
* * * * *
Item 2. Registrant Information and Participant Plan Annual Information
    The registrant shall provide a written statement to participants
advising them of the availability without charge, upon written or oral
request, of the documents incorporated by reference in Item 3 of Part
II of the registration statement, and stating that these documents are
incorporated by reference in the Section 10(a) prospectus. The
statement also shall indicate the availability without charge, upon
written or oral request, of other documents required to be delivered to
employees pursuant to Rule 428(b) (Sec.  230.428(b)), and to platform
workers pursuant to Rule 428(d). The statement shall include the
address (giving title or department) and telephone number to which the
request is to be directed.
* * * * *

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

0
7. The general authority citation for part 240 continues 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, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 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, secs. 503 and 602, 126 Stat. 326 (2012), unless otherwise
noted.
* * * * *
0
8. Amend Sec.  240.12g5-1 by revising 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, or a compensation plan for platform workers
pursuant to Sec.  230.701(h) of this chapter, 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 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:
    (1) 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; or
    (2) Pursuant to a compensation plan for platform workers if such
plan and the person who received the securities pursuant to the plan
met the plan and participant conditions of Sec.  230.701(h) of this
chapter.
    (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.

    Note 1 to paragraph (a)(8)(ii):  Section 230.701(h) applies only
to offers or sales of securities occurring prior to five years
following the date of effectiveness of Sec.  230.701(h). On that
date, Sec.  230.701(h) will expire and will no longer be effective.

* * * * *

    By the Commission.

    Dated: November 24, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-26374 Filed 12-10-20; 8:45 am]
BILLING CODE 8011-01-P