79936 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Proposed Rules 

1 15 U.S.C. 77a et seq. 

2 15 U.S.C. 78a et seq. 

Paragraph 6005 Class E Airspace Areas 

Extending Upward From 700 Feet or More 

Above the Surface of the Earth. 

* * * * * 

ACE NE E5 Cambridge, NE 

Cambridge Municipal Airport, NE 

(Lat. 40°18′24′′ N, long. 100°09′43′′ W) 

That airspace extending upward from 700 

feet above the surface within a 7.5-mile 

radius of Cambridge Municipal Airport. 

Issued in Seattle, Washington, on 

December 7, 2020. 

B.G. Chew, 

Acting Group Manager, Operations Support 

Group, Western Service Center. 

[FR Doc. 2020–27207 Filed 12–10–20; 8:45 am] 

BILLING CODE 4910–13–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR 230, 239, and 240 

[Release Nos. 33–10892; 34–90948; File No. 

S7–19–20] 

RIN 3235–AM79 

Temporary Rules to Include Certain 

‘‘Platform Workers’’ in Compensatory 

Offerings Under Rule 701 and 

Form S–8 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

proposing for public comment 

amendments to the exemption from 

registration under the rules of the 

Securities Act of 1933 (‘‘Securities Act’’) 

for securities issued by non-reporting 

companies pursuant to compensatory 

arrangements and to Form S–8, the 

registration statement for offerings by 

reporting companies pursuant to 

employee benefit plans. The 

amendments would establish a 

temporary provision under Securities 

Act rules that, on a trial basis, would 

permit a non-reporting issuer to offer 

and sell securities for a compensatory 

purpose to an expanded group of 

workers without having to register the 

offers and sales under the Securities 

Act, as long as certain conditions are 

met. Specifically, the proposed 

amendments would permit the issuer to 

offer and sell securities to those workers 

who provide services available through 

the issuer’s internet-based marketplace 

platform or through another 

widespread, technology-based 

marketplace platform or system 

(‘‘platform workers’’). The amendments 

would similarly, on a trial basis, permit 

a reporting issuer to include such 

workers in compensatory offerings 

registered on Form S–8. These proposed 

rule amendments would expire, absent 

further action by the Commission, five 

years from the date of their 

effectiveness. We are also proposing to 

amend the rules under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’). 

The amendment would extend the 

exclusion from the definition of ‘‘held of 

record’’ and corresponding safe harbor, 

which currently applies to securities 

held by persons who received them 

pursuant to an employee compensation 

plan, to securities held by persons who 

received them pursuant to a 

compensation plan for platform workers 

under the proposed Securities Act rule 

amendment. The proposed exclusion 

and safe harbor for securities issued to 

platform workers under Exchange Act 

rules would not be temporary. 

DATES: Comments should be received on 

or before February 9, 2021. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/submitcomments.htm). 

Paper Comments 

• Send paper comments to Vanessa 

A. Countryman, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number S7–19–20. To help us process 

and review your comments more 

efficiently, please use only one method. 

We will post all comments on our 

internet website (https://www.sec.gov/ 

rules/proposed.shtml). Comments are 

also available for website viewing and 

printing in our Public Reference Room, 

100 F Street NE, Washington, DC 20549 

on official business days between the 

hours of 10 a.m. and 3 p.m. All 

comments received will be posted 

without change. Persons submitting 

comments are cautioned that we do not 

redact or edit personal identifying 

information from comment submissions. 

You should submit only information 

that you wish to make available 

publicly. 

We or the staff may add studies, 

memoranda, or other substantive items 

to the comment file during this 

rulemaking. A notification of the 

inclusion in the comment file of any 

such materials will be made available 

on our website. To ensure direct 

electronic receipt of such notifications, 

sign up through the ‘‘Stay Connected’’ 

option at www.sec.gov to receive 

notifications by email. 

FOR FURTHER INFORMATION CONTACT: 

Elliot Staffin, Office of Rulemaking, at 

(202) 551–3430, in the Division of 

Corporation Finance, U.S. Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: We are 

proposing to amend 17 CFR 230.428 

(‘‘Rule 428’’), 17 CFR 230.701 (‘‘Rule 

701’’), and 17 CFR 239.16b (‘‘Form S– 

8’’) under the Securities Act,1 and 17 

CFR 240.12g5–1 (‘‘Rule 12g5–1’’) under 

the Exchange Act.2

Table of Contents 

I. Introduction 

A. Rule 701, Form S–8, and the Concept 

Release 

B. Summary of the Proposed Amendments 

II. Description of the Proposed Amendments 

A. Proposed Inclusion and Definition of 

‘‘Platform Worker’’ Under Rule 701 and 

Form S–8 

B. Additional Requirements for Issuances 

to Platform Workers Under Rule 701 and 

Form S–8 

C. Integration of Proposed Rule 701(h) 

With the Existing Rule 701 Exemption 

D. Integration With Exchange Act Rule 

12g5–1 

E. Considerations Specific to Form S–8 

F. Requirement To Furnish Certain 

Information 

G. Expiration of the Temporary Rules 

Authorizing Issuances to Platform 

Workers Under Rule 701 and Form S–8 

III. General Request for Comments 

IV. Economic Analysis 

A. Economic Baseline 

1. Overview of the Gig Economy 

2. Characteristics of Gig Economy Workers 

3. The Online Platform Economy 

B. Broad Economic Considerations 

C. Expected Economic Benefits and Costs 

1. Expected Economic Benefits 

2. Expected Economic Costs 

D. Effects on Efficiency, Competition, and 

Capital Formation 

E. Reasonable Alternatives 

V. Paperwork Reduction Act 

A. Summary of the Collection of 

Information 

B. Summary of the Proposed Amendments’ 

Effects on the Collections of Information 

C. Incremental and Aggregate Burden and 

Cost Estimates for the Proposed 

Amendments 

D. Request for Comment 

VI. Initial Regulatory Flexibility Act Analysis 

A. Reasons for, and Objectives of, the 

Proposed Action 

B. Legal Basis 

C. Small Entities Subject to the Proposed 

Rules 

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

E. Duplicative, Overlapping, or Conflicting 

Federal Rules 

F. Significant Alternatives 


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Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Proposed Rules 79937 

3 15 U.S.C. 77e. 

4Only issuers that are not subject to the reporting 

requirements of Section 13 or 15(d) of the Exchange 

Act (15 U.S.C. 78m and 78o(d)) and are not 

investment companies registered or required to be 

registered under the Investment Company Act of 

1940 (15 U.S.C. 80a–1 et seq.) are eligible to use 

Rule 701. See 17 CFR 230.701(b). 

5When the Commission first proposed Rule 701, 

it initially limited the exemption to the issuer’s 

employees, directors, trustees or officers (or those 

of its parents or subsidiaries). See Regulation D 

Revisions; Exemption for Certain Employee Benefit 

Plans, Release No. 33–6683 [52 FR 3015 (Jan. 30, 

1987)] (‘‘Rule 701 Proposing Release’’). The 

Commission specifically excluded consultants and 

‘‘independent agents’’ due to a concern that 

including them could lead to an exemption broader 

than the intended compensatory purpose. See, e.g., 

Employee Benefit Plans and Compensation 

Contracts, Release No. 33–6726 (July 24, 1987) [52 

FR 29033 (Aug. 5, 1987)] (‘‘Rule 701 Reproposing 

Release’’). Eventually, however, when adopting 

Rule 701, the Commission included issuances to 

consultants and advisors within the rule’s scope. 

The Commission noted comments pointing out that 

securities issuances to such persons could be for 

compensatory and non-capital-raising purposes and 

determined that there was no meaningful basis for 

distinguishing issuances to them and to employees. 

See Compensatory Benefit Plans and Contracts, 

Release No. 33–6768 [53 FR 12918–02 (Apr. 20, 

1988)] (‘‘Rule 701 Adopting Release’’). In 1999, the 

Commission amended Rule 701, consistent with 

amendments to Form S–8, to prevent the misuse of 

that form for capital-raising transactions. See Rule 

701—Exempt Offerings Pursuant to Compensatory 

Arrangements, Release No. 33–7645 (Feb. 25, 1999) 

[64 FR 11095 (Mar. 8, 1999)] (‘‘1999 Rule 701 

Adopting Release’’). Specifically, the Commission 

modified the definition of consultants and advisors 

to require that they be natural persons, provide 

bona fide services, and the services not be in 

connection with the offer or sale of securities in a 

capital-raising transaction and not directly or 

indirectly promote or maintain a market for the 

issuer’s securities. See id. 

6 17 CFR 230.701(c)(2) defines a ‘‘compensatory 

benefit plan’’ as ‘‘any purchase, savings, option, 

bonus, stock appreciation, profit sharing, thrift, 

incentive, deferred compensation, pension or 

similar plan.’’ 

7See 17 CFR 230.701(c). The exemption also 

extends to offers and sales of securities under 

written compensatory plans or contracts established 

by the issuer’s parent or the issuer’s or parent’s 

majority-owned subsidiaries. See id. The 

Commission has also indicated that a person in a 

de facto employment relationship with the issuer, 

such as a nonemployee providing services that 

traditionally are performed by an employee, with 

compensation paid for those services being the 

primary source of the person’s earned income, 

would qualify as an eligible person under the 

exemption. See 1999 Rule 701 Adopting Release, 

supra note 5. 8See Rule 701 Reproposing Release, supra note 

5, at 29033 (stating that ‘‘[t]he Commission 

historically has recognized that when transactions 

of this nature are primarily compensatory and 

incentive oriented, some accommodation should be 

made under the Securities Act’’). 9See Rule 701 Proposing Release, supra note 5, 

at 3020. 10See id.; see also 1999 Rule 701 Adopting 

Release, supra note 5, at 11095 (stating that when 

adopting Rule 701, ‘‘we determined that it would 

be an unreasonable burden to require these private 

companies, many of which are small businesses, to 

incur the expenses and disclosure obligations of 

public companies when their only public securities 

sales were to employees,’’ and further noting that 

‘‘these sales are for compensatory and incentive 

purposes, rather than for capital-raising’’). 

11See Executive Compensation and Related 

Person Disclosure, Release No. 33–8732A (Aug. 29, 

2006) [71 FR 53158 (Sept. 6, 2006)] (‘‘2006 

Executive Compensation Adopting Release’’) 

(stating that unlike salary and bonus compensation, 

stock option compensation does not require the 

payment of cash by the registrant, and therefore can 

be particularly attractive to registrants for which 

cash is a scarce resource; noting that stock option 

compensation may also provide an incentive for 

employees to work to increase the registrant’s stock 

price; and additionally indicating that some 

registrants may be able to use stock option 

compensation to help retain employees, because an 

employee with unvested in-the-money options 

forfeits his potential value if he leaves the 

registrant’s employ.). 

12See Registration of Securities on Form S–8, 

Release No. 33–7646 (Feb. 25, 1999) [64 FR 11103 

(Mar. 8, 1999)] (‘‘1999 Form S–8 Adopting 

Release’’). 

13See Form S–8, General Instruction A.1.(a)(1). 

See also 1999 Form S–8 Adopting Release (stating 

that issuers may continue to use securities 

registered on Form S–8 to compensate persons who 

have a de facto employment relationship with them. 

Such a relationship may exist where a person not 

employed by a registrant provides the registrant 

with bona fide services that traditionally are 

performed by an employee, and the compensation 

paid by the registrant for those services is the 

primary source of the person’s earned income.). 

14See Registration and Reporting Requirements 

for Employee Benefit Plans, Release No. 33–6867 

(June 6, 1990) [55 FR 23909 (June 13, 1990)] (‘‘1990 

Form S–8 Adopting Release’’). 

15See Concept Release on Compensatory 

Securities Offerings and Sales, Release No. 33– 

10521 (July 18, 2018) [83 FR 34958 (July 24, 2018)] 

(‘‘Concept Release’’). Unless otherwise indicated, 

comments cited in this release are to the public 

comments on the Concept Release, which are 

available at https://www.sec.gov/comments/s7-18- 

18/s71818.htm. 

16See id. While the Commission amended Rule 

701 in 2018 to implement the Congressional 

mandate to raise the Rule 701(e) disclosure 

threshold from $5 million to $10 million, see 

Release No. 33–10520 (Jul. 18, 2018) 

[83 FR 34940 (Jul. 24, 2018)], the last substantive 

amendment of Rule 701 prior to then was in 1999. 

See 1999 Rule 701 Adopting Release supra note 5. 

The Commission last substantively amended Form 

S–8 in 2005. See Release No. 33–8587 (Jul. 15, 

2005) [70 FR 42234 (Jul. 21, 2005)]. 

VII. Small Business Regulatory Enforcement 

Fairness Act 

VIII. Statutory Authority 

I. Introduction 

A. Rule 701, Form S–8, and the Concept 

Release 

Title 17, section 230.701 (‘‘Rule 701’’) 

provides an exemption from the 

registration requirements of Securities 

Act Section 5 3 for offers and sales of 

securities by non-reporting companies 4

to their employees, officers, directors, 

trustees, consultants, or advisors 5 under 

written compensatory benefit plans 6 or 

written agreements relating to 

compensation.7 The rule reflects the 

Commission’s long-standing position 

that offers and sales of securities for 

compensatory purposes raise different 

issues, and therefore should be treated 

differently, from offers and sales that 

raise capital for the issuer of the 

securities.8

For example, when first proposing 

Rule 701, the Commission recognized 

that employee equity incentive 

arrangements are ‘‘a potentially 

important tool to attract, compensate 

and motivate employees.’’ 9 It further 

expressed the concern that private, 

smaller companies were forgoing this 

potentially valuable means of 

compensation because of the costs of 

complying with Securities Act 

registration requirements.10 The 

Commission also has expressly 

addressed the role that equity 

compensation may play in the 

employment relationship by indicating 

that using equity as a component of 

compensation may align the incentives 

of employees with the success of the 

enterprise, facilitate recruitment and 

retention, and preserve cash for the 

issuer’s operations.11

Form S–8 is the simplified form for 

the registration of securities transactions 

involving an issuance to a registrant’s 

employees in a compensatory or 

incentive context and for a non-capitalraising purpose.12 For purposes of Form 

S–8, the term ‘‘employee’’ includes 

consultants and advisors as long as they 

are natural persons and provide bona 

fide services to the registrant not in 

connection with a capital-raising 

transaction or promoting or maintaining 

a market for the registrant’s securities.13

Form S–8 provides for an abbreviated 

disclosure format, allows for updating 

through forward incorporation by 

reference of Exchange Act reports, and 

is effective immediately upon filing.14 It 

also requires the issuer to provide 

disclosure to employees and others 

receiving securities in the offering. In 

addition, the full spectrum of investor 

protections associated with registration 

under the Securities Act applies to the 

transaction. 

In July 2018, the Commission 

published a concept release to solicit 

comment on whether and how best to 

modernize the exemption under Rule 

701 and to update Form S–8.15 In the 

release, the Commission requested 

comment on how to address, consistent 

with investor protection, the significant 

evolution that has taken place in the 

types of compensatory offerings issuers 

make and the composition of the 

workforce since the Commission last 

substantively amended this rule and 

form.16 Regarding workforce changes, 

the Commission focused on the new 

types of work relationships between 

companies and individuals that have 


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79938 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Proposed Rules 

17See id., at Section I.B. Other names for the ‘‘gig 

economy’’ include the ‘‘on-demand economy’’ and 

the ‘‘sharing economy.’’ See, e.g., Alex Kirven, 

‘‘Comment: Whose Gig Is It Anyway? Technological 

Change, Workplace Control and Supervision, and 

Workers’ Rights in the Gig Economy, 89 U. Colo. L. 

Rev. 249, 253 (Winter 2018), available at http://

lawreview.colorado.edu/wp-content/uploads/2018/ 

05/Kirven-Whose-Gig-Is-It-Anyway-TechnologicalChange-Workplace-Control-and-Supervision-andWorkers-Rights-in-the-Gig-Economy.pdf. 

18See id. 

19See, e.g., Working the Crowd: Employment and 

Labor Law in the Crowdsourcing Industry, 32 

Berkeley J. Emp. & Lab. L. 143 (2011) (providing 

examples of crowdsourcing, such as a platform 

provider’s use of multiple workers to tag 

photographs according to their content, or to build 

the back-end of a platform provider’s interactive 

website). 

20See supra note 7. 

21See the letters from Airbnb, Inc. (Sept. 21, 

2018) (‘‘Airbnb’’), the American Bar Association, 

Business Law Section (Nov. 28, 2018) (‘‘ABA’’), 

Center for Capital Markets Competitiveness, U.S. 

Chamber of Commerce (Sept. 24, 2018) 

(‘‘Chamber’’), Davis Polk & Wardwell, LLP (‘‘Davis 

Polk’’), Indigo Ag, Inc. (Jul. 8, 2019) (‘‘Indigo’’), 

Postmates (Oct. 17, 2018), Brian Sament (Oct. 14, 

2018) (‘‘Sament’’), Sullivan & Cromwell LLP (Sept. 

24, 2018) (‘‘Sullivan’’), and Uber Technologies, Inc. 

(Oct. 11, 2018) (‘‘Uber’’). 

22See, e.g., letters from ABA, Chamber, Indigo, 

and Postmates. 

23See, e.g., The Rise and Nature of Alternative 

Work Arrangements in the United States, 1995– 

2015, Lawrence F. Katz and Alan B.Krueger, 

National Bureau of Economic Research, available at 

http://www.nber.org/papers/w22667 (finding a 

substantial rise in the incidence of alternative work 

arrangements for U.S. workers from 2005 to 2015, 

and defining alternative work arrangements as 

including temporary help agency workers, on-call 

workers, contract workers, and independent 

contractors or freelancers); see also Contingent 

Workforce, U.S. Government Accountability Office, 

GAO–15–168R (2015), available at https://

www.gao.gov/assets/670/669766.pdf (finding that, 

while the size of the U.S. contingent workforce 

varies by definition and data source, using an 

expansive definition of alternative work 

arrangements, 40.4% of the U.S. employed labor 

force in 2010 was in an alternative work 

arrangement). 

24See proposed Rule 701(h) and proposed 17 CFR 

239.16b(c). As explained below, the proposed 

expanded scope of Rule 701 and Form S–8 would 

be temporary while we examine whether to adopt 

the rules or similar rules on a more permanent 

basis. 

25See Concept Release, supra note 15, at Section 

II.A. 

26See, e.g., proposed Rule 701(h)(3) and proposed 

17 CFR 239.16b(c)(1). 

27See infra Section II.G. 

emerged in the so-called ‘‘gig 

economy.’’ 17

These new types of work 

relationships have arisen in large part 

due to the internet and reductions in the 

costs of communication and information 

processing. They typically involve an 

individual’s use of an internet 

‘‘platform’’ provided by a company (the 

‘‘platform provider’’) to find a particular 

type of work, or ‘‘gig’’ (i.e., task or job). 

The work could involve the individual 

providing services to end users, such as 

ride-sharing, food delivery, household 

repairs, dog-sitting, or tech support, or 

using the platform to sell goods or lease 

property to third parties.18 Other new 

work relationships may involve 

individuals using the platform to 

perform tasks or services for the 

platform provider itself.19

A significant characteristic of these 

new work relationships is that the 

individual worker may have greater 

flexibility in determining when and 

how much he or she works than in a 

traditional employment relationship 

where those determinations are 

typically made by the issuer. In 

addition, these new work relationships 

can be, and often are, on a short-term, 

part-time, or freelance basis. Another 

significant characteristic is that an 

individual who provides services or 

goods through these platforms may have 

similar relationships with multiple 

companies through which the 

individual may engage in the same or 

different business activities. Given the 

characteristics of these new work 

relationships, the individual workers 

might not be employees, consultants, 

advisors, or de-facto employees 20

eligible to receive securities in 

compensatory arrangements under Rule 

701. 

Numerous commenters on the 

Concept Release who addressed issues 

relating to ‘‘gig economy’’ workers 

supported including them within the 

scope of Rule 701 and Form S–8.21

Several noted that they did not believe 

or were uncertain that ‘‘gig economy’’ 

workers would fall within Rule 701’s 

current categories of employees, 

consultants, or advisors, and 

recommended adding a new category of 

worker to include them.22

The new work relationships of the gig 

economy have become increasingly 

significant to the broader U.S. 

economy.23 They also raise some of the 

same considerations that led the 

Commission to adopt Rule 701. For 

example, ‘‘gig economy’’ issuers may 

have the same compensatory and 

incentive motivations to offer equity 

compensation to individuals 

participating in the companies’ 

platform-based businesses. Permitting 

gig economy issuers to utilize the Rule 

701 exemption on a temporary basis 

would allow the Commission to assess 

the appropriateness of the exemption for 

these new work relationships and thus 

should help inform the Commission’s 

ongoing efforts to modernize its rules in 

light of changing economic and market 

conditions. 

For the above reasons, we propose to 

include a new category of worker, the 

‘‘platform worker,’’ within the scope of 

Rule 701 and Form S–8.24 As we stated 

in the Concept Release, any such 

expansion of Rule 701 and Form S–8 

must be consistent with the 

Commission’s mandate to protect 

investors.25 It should not facilitate offers 

and sales of unregistered securities 

under the guise of being compensatory 

when in fact they are undertaken for 

capital-raising purposes. Therefore, we 

are proposing to expand Rule 701 and 

the use of Form S–8 to facilitate 

compensatory transactions with 

platform workers while also proposing 

conditions designed to limit the 

possibility that the rule changes could 

result in offers and sales for capitalraising purposes.26

We are also proposing these changes 

on a temporary basis 27 to allow us to 

assess whether unregistered issuances of 

securities to platform workers under 

expanded Rule 701, or issuances 

registered on expanded Form S–8, are 

being made for appropriate 

compensatory purposes and not for 

capital-raising purposes. Similarly, we 

intend to assess whether such issuances 

have the expected beneficial effects for 

issuers in the ‘‘gig economy,’’ their 

platform workers, and ultimately their 

investors and whether such issuances 

have resulted in any unintended 

consequences. This assessment, in turn, 

should help us determine whether to 

modify or expand the scope of Rule 701 

and Form S–8 on a permanent basis. 

We welcome feedback and encourage 

interested parties to submit comments 

on any or all aspects of the proposed 

rule amendments. When commenting, it 

would be most helpful if you include 

the reasoning behind your position or 

recommendation. 

B. Summary of the Proposed 

Amendments 

We propose to amend Rule 701 by 

adding a temporary rule provision that, 

for five years, would enable issuers to 

use Rule 701 to compensate certain 

‘‘platform workers,’’ subject to specified 

conditions. Under the amendments, an 

issuer would be able to use the Rule 701 

exemption to offer and sell its securities 

on a compensatory basis to platform 

workers who, pursuant to a written 

contract or agreement, provide bona fide 

services by means of an internet-based 

platform or other widespread, 

technology-based marketplace platform 

or system provided by the issuer if: 

• The issuer operates and controls the 

platform, as demonstrated by its ability 

to provide access to the platform, to 

establish the principal terms of service 

for using the platform and terms and 


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Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Proposed Rules 79939 

28An issuer using proposed Rule 701(h) would 

also be able to continue to use Rule 701 for 

transactions to persons eligible under 17 CFR 

230.701(c). 

29See proposed Rule 701(h)(1); see also proposed 

17 CFR 239.16b(c) and proposed amended General 

Instruction A.1.(b)(1) to Form S–8, which reference 

the proposed definition of ‘‘platform worker’’ under 

proposed Rule 701(h)(1). 

30See proposed new Rule 701(h)(2)(i) (the first 

prong of the proposed definition of platform 

worker); see also proposed 17 CFR 239.16b(c)(1) 

and proposed amended General Instruction 

A.1.(b)(1) to Form S–8. As explained below in 

Section II.B., the services may not be in connection 

with the offer or sale of securities in a capitalraising transaction. 

31 In a companion rulemaking, we are proposing 

to expand the scope of coverage of the Rule 701 

exemption, which currently includes compensatory 

issuances to employees of an issuer’s or its parent’s 

majority-owned subsidiaries, to include 

compensatory issuances to employees of all of an 

issuer’s or its parent’s subsidiaries. See Release No. 

33–10891 (Nov. 24, 2020), at Section II.C.3 

(proposing to amend Rule 701(c)). Our proposed 

inclusion of platform workers of an issuer’s 

subsidiaries, without regard to whether they are 

majority-owned, would be consistent with the 

proposed amendment of Rule 701(c). Like this 

proposed amendment, the meaning of ‘‘subsidiary’’ 

under Rule 701(h) would be governed by the 

general definition of subsidiary for purposes of the 

Securities Act. Under that definition, a ‘‘subsidiary’’ 

of a specified person is an affiliate controlled by 

such person directly or indirectly through one or 

more intermediaries. See 17 CFR 230.405. 

32See proposed Rule 701(h)(2)(i). 

33For the purpose of Rule 701(h), the term 

‘‘written contract or agreement’’ would include an 

electronic, internet-based contract or agreement. We 

believe that a similar interpretation applies to the 

term ‘‘written compensation contract’’ in Rule 

701(c). Because the proposed Rule 701(h) definition 

of ‘‘platform worker’’ would also be used in Form 

S–8, the same meaning of ‘‘written contract or 

agreement’’ would apply in that context. See 

proposed General Instruction A.1.(b)(1) of Form S– 

8; see also proposed 17 CFR 239.16b(c)(1). 

34See proposed Rule 701(h)(2)(ii). 

35See, e.g., letter from Chamber; see also letter 

from Airbnb. 

conditions by which the platform 

worker receives payment for the 

services provided through the platform, 

and to accept and remove platform 

workers participating in the platform; 

• The issuance of securities to 

participating platform workers 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; 

• No more than 15 percent of the 

value of compensation received by a 

participating worker from the issuer for 

services provided by means of the 

platform during a 12-month period, and 

no more than $75,000 of such 

compensation received from the issuer 

during a 36-month period, shall consist 

of securities, with such value 

determined at the time the securities are 

granted; 

• 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 

• 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.28

The proposed amendments also 

would permit an Exchange Act 

reporting issuer to register the offer and 

sale of its securities to its platform 

workers using Form S–8. The same 

conditions proposed for Rule 701 

issuances would apply to issuances to 

platform workers that are registered on 

Form S–8, except for the proposed 

transferability restriction. Like the 

proposed amendments to Rule 701, the 

proposed Form S–8 amendments would 

be temporary and would expire, absent 

further Commission action, on the same 

date as the Rule 701 amendments. 

In order to help in our evaluation of 

the proposed expanded scope of Rule 

701 and Form S–8, we are also 

proposing that any issuer that issues 

securities to platform workers would be 

required to furnish information to the 

Commission at six-month intervals 

(each, an ‘‘interval’’), regarding: 

1. The criteria used to determine 

eligibility for awards, whether those 

criteria are the same as for other 

compensatory transactions, and whether 

those criteria, including any revisions to 

the criteria, are communicated to 

platform workers in advance as an 

incentive; 

2. The type and terms of securities 

issued and whether they are the same as 

for other compensatory transactions by 

the issuer during that interval; 

3. If pursuant to Rule 701, the 

reasonable steps taken to prohibit the 

transfer of the securities sold pursuant 

to this temporary rule; 

4. The percentage of overall 

outstanding securities that the amount 

issued cumulatively under this 

temporary rule represents; 

5. During the interval, the number of 

platform workers, the number of nonplatform workers, the number of 

platform workers who received 

securities pursuant to the temporary 

rule, and the number of non-platform 

workers who received securities 

pursuant to the issuer’s Rule 701 or 

Form S–8 issuances; 

6. Both in absolute amounts and as a 

percentage of the issuer’s total Rule 701 

or Form S–8 issuances during the 

interval: 

a. The aggregate number of securities 

issued to platform workers; and 

b. The aggregate dollar amount of 

securities issued to platform workers. 

II. Description of the Proposed 

Amendments 

A. Proposed Inclusion and Definition of 

‘‘Platform Worker’’ Under Rule 701 and 

Form S–8 

We propose to amend Rule 701 and 

Form S–8 to permit an issuer on a 

temporary basis to offer and sell 

securities to certain platform workers. 

Under the proposed definition of 

‘‘platform worker,’’ 29 eligible workers 

would be those persons unaffiliated 

with the issuer who meet two 

conditions. First, the worker must 

provide bona fide services through or by 

means of the issuer’s internet-based or 

other widespread, technology-based 

marketplace platform or system 

(‘‘platform’’). Workers providing 

services to third-party end-users would 

qualify, as long as the issuer benefits 

from such services (e.g., by receiving a 

fee for the worker’s use of the platform 

or a percentage of the compensation 

received from the end-user for the 

worker’s services).30 Consistent with the 

treatment of persons eligible for the 

current exemption under 17 CFR 

230.701(c) (‘‘Rule 701(c)’’), platform 

workers providing services to the issuer, 

or the issuer’s parents, subsidiaries,31 or 

subsidiaries of the issuer’s parent, 

would also qualify.32 Second, the 

services must be provided pursuant to a 

written contract or agreement between 

the issuer and the platform worker 33

and must be provided through a 

platform-based marketplace (or other 

widespread, technology-based 

marketplace platform or system) that the 

issuer operates and controls.34

Commenters who supported 

expanding the scope of Rule 701 and 

Form S–8 to include offers and sales of 

securities to platform workers stated 

that updating Rule 701 and Form S–8 to 

include such workers is necessary to 

keep pace with evolutions in the 

economy and the labor market.35 One 

commenter indicated that such an 

update would be consistent with the 

goals of the Jumpstart Our Business 

Startups Act (‘‘JOBS’’ Act) to spur 

entrepreneurship and support the 

business startups and private companies 

that are vital to the U.S. economy, and 

that increased alignment of incentives 

between gig economy companies and 


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36See letter from Airbnb. 

37See letter from Sament; see also letter from 

Airbnb. 

38See letter from Postmates. 

39See letter from Indigo. 

40See letter from Sen. Sherrod Brown (Mar. 7, 

2019); see also letter from National Employment 

Law Project (Mar. 4, 2019) (‘‘NELP’’) (‘‘Expanding 

the rule has the potential to further muddy the 

waters on ‘gig’ workers’ employment status and 

even legitimize their independent contractor status 

at a time when this issue is being examined by 

legislatures, courts, and agencies with expertise on 

employment status.’’); and letter from Chairwoman 

Maxine Waters (Apr. 1, 2020) (opposing 

‘‘weakening Rule 701 of the Securities Act of 1933 

to allow companies to compensate certain nontraditional employees with equity compensation in 

lieu of a traditional paycheck and without 

important investor protections’’). But see, e.g., infra 

Section II.B for a discussion of certain investor 

protection conditions; and letter from Rep. Patrick 

McHenry (Mar. 30, 2020) (requesting that any 

recipient of funds under the Coronavirus, Aid, 

Relief, and Economic Security (CARES) Act be 

encouraged to provide equity compensation to its 

entire workforce, including non-traditional 

workers). 

41The proposed amendments provide, however, 

that, following the expiration of temporary Rule 

701(h), an issuer may continue to rely on the Rule 

701(h) exemption for the sale of securities 

underlying options, warrants, or rights previously 

issued in an exempt transaction pursuant to Rule 

701(h). See proposed Rule 701(h)(1)(ii) and infra 

Section II.G. We believe this provision is necessary 

in order to remove a potential disincentive to the 

use of the proposed exemption to issue options to 

platform workers. The Commission has taken a 

similar approach regarding securities sold by an 

issuer after it has become public that were initially 

offered pursuant to Rule 701. See 17 CFR 

230.701(b)(2). 

42See letters from Chamber and Davis Polk. In the 

companion rulemaking, we are proposing to 

eliminate the ‘‘natural person’’ requirement in 

connection with Rule 701 eligibility for consultants 

and advisors by extending such eligibility to 

service-providing entities meeting specified 

conditions (e.g., limits on the number of persons 

owning an entity and requiring a certain percentage 

of those persons to provide services). See Release 

No. 33–10891 at Section II.C.1. We are also 

proposing a similar change regarding consultant 

and advisor eligibility under Form S–8. See Release 

No. 33–10891 at Section II.C.2. 

43See 1999 Form S–8 Adopting Release at Section 

II.A.1 (‘‘We agree with commenters that it should 

not matter if the consulting contract is with an 

entity or a natural person, as long as the securities 

registered are issued to the natural persons working 

for the consulting entity who provide bona fide 

services to the issuer. Where the securities are 

issued to these persons, contracting with a 

consulting entity would not abuse Form S–8. We 

have revised the amendments to eliminate the 

proposed requirement that issuers contract only 

with natural persons, while retaining the 

requirement that the securities must be issued to 

natural persons.’’); see also letter from Davis Polk. 

44See, e.g., letter from ABA; see also letter from 

Sullivan (stating that to encompass the new types 

of alternative work arrangements, Rule 701 (and 

Form S–8) should encompass those individuals 

providing services to or on behalf of an issuer or 

making or distributing the products sold or 

provided to the issuer’s consumers). 

45See proposed Rule 701(h)(2)(i). For example, a 

platform that provided for the permanent transfer 

of real estate in fee simple, as opposed to the 

temporary rental of real estate, would not constitute 

bona fide services within the meaning of the rule. 

participating platform workers would 

benefit both.36

Some commenters emphasized the 

potential benefits to platform workers of 

expanding Rule 701. Commenters stated 

that expanding eligibility for Rule 701 

issuances would help democratize share 

ownership and wealth by allowing the 

many ordinary Americans participating 

in the gig economy to make significant 

strides toward greater wealth and 

financial security.37

Other commenters noted the potential 

benefits to the platform providers of 

expanding Rule 701. One commenter 

indicated that enabling privately held 

companies to grant equity compensation 

to platform workers performing services 

would enable those platforms to attract 

and retain talent.38 Another commenter 

stated that the ability to grant equity 

compensation to platform workers 

would significantly enhance the growth 

and expansion of new economy 

companies and help level the playing 

field between private companies and 

public companies participating in the 

new economy.39

Some commenters, however, opposed 

the expansion of the scope of Rule 701 

and Form S–8 to include offers and 

sales of securities to platform workers 

because of their belief that the 

Commission lacks the expertise to 

assess accurately changes in the labor 

market, and due to their concern that 

such regulatory changes to Rule 701 and 

Form S–8 would encourage companies 

to misclassify employees and 

undermine American workers.40

We agree with commenters that 

expanding the scope of Rule 701 and 

Form S–8 to include offers and sales of 

securities to platform workers 

participating in an issuer’s platformbased marketplace could benefit the 

issuer and its investors, including those 

platform workers that are new equity 

holders. We are mindful, however, that 

the gig economy is evolving. We are 

therefore making the rule amendments 

temporary so that we can reassess their 

impact as these markets develop.41

Although we understand that the 

development of the gig economy raises 

a number of issues under labor, tax, and 

other regulatory regimes, our proposed 

amendments to Rule 701 and Form S– 

8 to include these workers solely reflect 

considerations relevant to the U.S. 

Federal securities laws. The proposed 

amendments are not meant, and should 

not be construed, to address issues 

raised under any other regulatory 

regimes. We express no opinion on 

whether or not these ‘‘gig economy’’ or 

platform workers would be considered 

‘‘employees’’ for purposes of other laws 

or regulations. 

The proposed amendments would 

require an eligible platform worker to be 

a natural person or an entity meeting 

specified conditions. We recognize that 

the ‘‘gig economy’’ is a fluid, developing 

market in which participating workers 

may be organized in various ways. In 

this regard, we note that some 

commenters recommended that 

platform workers should not be subject 

to a natural person requirement to 

participate in Rule 701 offerings.42 We 

recognize that some platform workers 

may form limited liability companies or 

similar legal entities for a variety of 

reasons, such as tax planning and 

personal liability protection. In order to 

accommodate such workers and provide 

additional flexibility for an evolving 

market, the proposed rules provide that 

a platform worker may be an entity as 

long as substantially all of its activities 

involve the performance of bona fide 

services that meet the requirements of 

proposed Rule 701(h), and the 

ownership interest of the entity is 

wholly and directly held by the natural 

person performing the services pursuant 

to the proposed rule. This proposed 

approach would be similar to the 

Commission’s recognition of personal 

services businesses as corporate alter 

egos of natural persons with respect to 

the ability to participate in Form S–8 

offerings under existing employee, 

consultant, and advisor categories, 

where such businesses are whollyowned by (or jointly owned with the 

spouse of) the natural person who 

provides services to the issuer.43

We also recognize that the ‘‘gig 

economy’’ is a multi-faceted economic 

phenomenon and that, in some cases, 

participants may sell goods or conduct 

other activities—beyond providing 

services—by means of platforms. Some 

commenters recommended expanding 

the Rule 701 exemption to include any 

activity where there is an issuer 

providing a technology-based 

marketplace platform as long as the 

activity does not include capital-raising 

of the type currently prohibited by Rule 

701.44 Nevertheless, we are limiting this 

initial expansion of Rule 701 and Form 

S–8 eligibility to participants who 

provide bona fide services not in 

connection with capital-raising or with 

promoting or maintaining a market for 

the issuer’s securities. The proposed 

expansion would not cover the use of a 

platform for the sale or transfer of 

permanent ownership of discrete, 

tangible goods.45 We view the 

expansion of Rule 701 and Form S–8 to 

include platform workers who provide 

services, subject to the above 

limitations, as an incremental 


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46The Commission has similarly included a 

‘‘written contract or agreement’’ requirement as a 

condition of using the Rule 701 exemption to help 

ensure that an issuance of securities is being 

undertaken for a compensatory purpose. See the 

Rule 701 Adopting Release, supra note 5, at 12919 

(justifying the inclusion of issuances to consultants 

or advisors under Rule 701 in part because of the 

condition requiring a written plan or contract). 

47Although one commenter stated that ‘‘it is not 

necessary for a revised Rule 701 to micromanage 

the level of control’’ over a worker, see letter from 

Chamber, we agree with another commenter that 

indicated that some level of control by an issuer 

over the use of its platform would help ensure that 

the issuance of securities to workers participating 

in its marketplace platform under an expanded Rule 

701 is compensatory only. See letter from Airbnb. 

48See Rule 701(c). 

49See proposed Rule 701(h)(1)(i). 

50See Release No. 33–10891 at Section II.C.2. 

51See proposed Rule 701(h)(1)(i). 

52See proposed General Instruction A.1.(b)(4)(i) 

of Form S–8. 

53See proposed Rule 701(h)(1)(i); see also 

proposed General Instruction A.1.(b)(4)(ii) of Form 

S–8. Such treatment would be consistent with the 

expanded scope of Form S–8 proposed in the 

companion rulemaking. See Release No. 33–10891 

at Section III.D.1. 

54The companion release includes other 

proposed amendments pertaining to business 

combinations that could be applicable to issuances 

to platform workers if adopted. For example, we are 

proposing to amend Rule 701(e) to address the 

disclosure delivery obligations regarding acquired 

entity derivative securities that the acquiring issuer 

assumes in a business combination transaction. 

Another proposed amendment would clarify that, 

in determining whether the amount of securities the 

acquiring issuer sold during any consecutive 12- 

month period exceeds $10 million under Rule 

701(e) [17 CFR 230.701(e)], the acquiring issuer 

would consider only the securities that it sold in 

reliance on Rule 701 during that period, and would 

not be required to include any securities sold by the 

acquired entity pursuant to the rule during the same 

12-month period. See Release No. 33–10891 at 

Section II.A.6. 

55See General Instruction A.1.(a)(3) of Form S–8. 

In the companion release, we are proposing to 

Continued 

evolutionary step that is consistent with 

the compensatory function of Rule 701 

and Form S–8 while limiting the 

potential for abuse. Depending on the 

results of the initial expanded use of 

Rule 701 and Form S–8, if adopted, the 

Commission could consider expanding 

eligibility to other activities, such as 

selling goods or other non-serviceproviding activities in the future. 

The proposed definition of platform 

worker would also include the 

condition that the issuer operates the 

platform for the provision of services 

pursuant to a written contract or 

agreement 46 between the issuer and the 

platform worker under which the issuer 

controls the use of the internet platform. 

We believe that this ‘‘issuer control’’ 

condition would help maintain an 

appropriate compensatory nexus 

between the issuer and participating 

platform workers.47

The appropriate nexus would be 

demonstrated by meeting three express 

requirements. First, the issuer must be 

able to provide access to the platform 

and establish the principal terms of 

service for using the platform. Second, 

the issuer must be able to establish 

terms and conditions by which the 

platform worker receives payment for 

the services provided through the 

platform. This could include an ability 

to establish the amount of the fees 

charged for using the platform. Such 

fees may include any fee charged to the 

participating worker for the use of the 

platform as well as any fee or percentage 

of payment charged to an end-user for 

the services provided by the worker. If 

there are no end-users, and multiple 

workers provide services directly to the 

issuer via the platform, the issuer must 

be able to determine the amount and 

method of payment for such services. 

Third, the issuer must have the 

authority to accept and remove the 

platform workers providing services 

through the platform. 

We believe that these three 

requirements are necessary and 

appropriate to demonstrate the requisite 

nexus for purposes of an expanded Rule 

701 and Form S–8. A written contract or 

agreement providing the issuer with 

control over the platform’s terms of use, 

including payment terms, would 

evidence that the issuance of securities 

to the worker is for compensatory and 

incentive purposes relating to the 

services being provided. In addition, 

requiring that the issuer control who 

may provide services through its 

platform would help prevent 

participating workers from using the 

platform primarily for noncompensatory purposes. The proposed 

conditions would not, however, limit 

what services an issuer could facilitate 

through its platform or how 

participating workers could provide the 

services. 

Rule 701 currently exempts offers and 

sales of securities to former employees, 

directors, general partners, trustees, 

officers, consultants, and advisors only 

if such persons were employed by or 

providing services to the issuer at the 

time the securities were offered.48 The 

proposed amendment to Rule 701 

would similarly exempt offers and sales 

to former platform workers if such 

workers met the conditions of 

§ 230.701(h) at the time the securities 

were offered.49

In a companion rulemaking, at the 

suggestion of commenters, we are 

proposing to expand the eligibility of 

former employees under Rule 701 to 

include post-resignation or termination 

offers and sales to: 

• Persons who were employed by or 

providing services to an issuer during a 

performance period ending within 12 

months preceding resignation or 

termination of their employment or 

service for which the securities were 

issued; and 

• Former employees of an acquired 

entity, as long as the securities are being 

issued in substitution or exchange for 

securities that were issued to the former 

employees of the acquired entity on a 

compensatory basis while such persons 

were employed by or providing services 

to the acquired entity.50

In the interest of providing consistent 

treatment, we are similarly proposing to 

include under Rule 701 offers and sales 

to former platform workers who met the 

conditions of § 230.701(h) during a 

period of service ending within 12 

months preceding the termination of 

service for which the securities were 

issued.51 We believe that exempting 

post-termination grants of securities to 

former platform workers that are made 

in respect of prior service during the 

specified 12-month period would 

benefit both issuers and platform 

workers by facilitating compensatory 

transactions. Moreover, because we 

believe that expanding the use of Form 

S–8 to former platform workers would 

be consistent with the compensatory 

purposes of Form S–8, we are similarly 

proposing to amend Form S–8 to 

include securities issued to former 

platform workers, including posttermination grants made in respect of 

prior service during the 12 months 

preceding the cessation of service.52

For similar reasons, we also are 

proposing to include in the exemption 

under Rule 701(h), and to allow the 

registration on Form S–8 of, securities 

issued to former platform workers of an 

acquired entity in substitution or 

exchange for securities that were issued 

to the former platform workers of the 

acquired entity on a compensatory basis 

while such workers were providing 

bona fide services to the acquired 

entity.53 Those persons would be able to 

participate in the acquiring issuer’s plan 

with respect to equity awards granted in 

connection with the acquisition to 

replace awards issued by the acquired 

entity while such workers provided 

services to the acquired entity.54

In addition to former employees, 

Form S–8 currently includes under its 

scope executors, administrators, or 

beneficiaries of the estates of deceased 

employees, guardians or members of a 

committee for incompetent former 

employees, or similar persons duly 

authorized by law to administer the 

estate or assets of former employees.55


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79942 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Proposed Rules 

amend Rule 701 to include a similar provision for 

the executors, administrators, or beneficiaries of the 

estates of deceased employees who may receive 

securities underlying options previously issued to 

former employees pursuant to Rule 701. See Release 

No. 33–10891 at Section II.C.2. 

56See proposed General Instruction A.1.(b)(4)(iii) 

to Form S–8 and proposed Rule 701(h)(1)(i). 

We are proposing a similar provision 

under Rule 701 and Form S–8 for the 

estates of deceased platform workers 

and the representatives of incompetent 

former platform workers.56 Although 

the proposed changes to Rule 701 to 

include platform workers would be 

temporary rules, we believe that this 

proposed provision could prove useful 

to the administration of the estate of a 

deceased platform worker or the 

representation of an incompetent former 

platform worker, particularly because, 

under the proposed rules, sales of 

securities underlying options issued 

pursuant to the temporary rules may 

occur following the rules’ expiration. 

Request for Comment 

1. Should we expand the scope of 

Rule 701 and Form S–8 to include offers 

and sales of securities to platform 

workers unaffiliated with the issuer who 

provide bona fide services to an issuer 

by means of the issuer’s internet-based 

platform, or through other widespread 

technology-based marketplace 

platforms, as proposed? Should the 

expansion of Rule 701 and Form S–8 

also include services provided by such 

workers to the issuer’s parents, majorityowned subsidiaries, or majority-owned 

subsidiaries of the issuer’s parent, as 

proposed? 

2. Is there a basis for treating platform 

workers differently than any other nonemployees not covered under the 

current exemption? Does the use of an 

internet-based platform establish a 

sufficient basis for treating those 

workers differently than non-employees 

in a different context? 

3. Should we also expand the scope 

of Rule 701 and Form S–8 to include 

offers and sales of securities to platform 

workers unaffiliated with the issuer who 

provide bona fide services to third-party 

end-users by means of the issuer’s 

internet-based marketplace platform, or 

through other widespread technologybased marketplace platforms or systems, 

and from which the issuer benefits, as 

proposed? 

4. Should we define or provide 

examples of a ‘‘widespread, technologybased marketplace platform or system’’ 

(other than an internet-based 

marketplace platform) that would fall 

within the scope of the proposed 

amendments? If so, how should we 

define that term, or what examples 

should we include? 

5. Is the term ‘‘services’’ sufficiently 

clear? Should we define it differently? If 

so, what should the definition be? 

Should we provide additional specific 

guidance concerning what activities 

constitute ‘‘services’’ for purposes of the 

proposed expansion of Rule 701 and 

Form S–8? 

6. Should we limit issuances under 

Rule 701(h) or an expanded Form S–8 

to platform workers who are unaffiliated 

with the issuer, as proposed? If so, 

should we provide a definition of or 

additional guidance concerning the 

meaning of ‘‘unaffiliated with the 

issuer’’? For example, should we define 

‘‘unaffiliated’’ as a person who is not an 

‘‘affiliate’’ as defined by 17 CFR 

230.405? Should we instead specify the 

types of persons that would satisfy the 

‘‘unaffiliated’’ provision? For example, 

should ‘‘unaffiliated’’ mean persons 

who are not an issuer’s employees, 

officers, directors, advisors, or 

consultants, or certain family members 

of such persons? If so, which family 

members would be treated as affiliates 

of the issuer and therefore be ineligible 

to receive securities under the proposed 

amendments to Rule 701 and Form S– 

8? 

7. Should we limit the use of the 

expanded Rule 701 and Form S–8 only 

to workers who provide bona fide 

services through an issuer’s marketplace 

platform, as proposed? Or should we 

consider other alternatives? For 

example: 

a. Should we permit an issuer to offer 

or sell securities to workers who engage 

in other platform-based activities, such 

as selling goods? If so, should we limit 

the types of goods? For example, should 

we only permit an issuer to offer or sell 

securities to workers who engage in 

selling of unique or value-added goods 

and not workers who merely use a 

platform to resell goods? 

b. If we were to permit an issuer to 

offer or sell securities to workers who 

engage in other platform-based 

activities, such as selling goods, what 

characteristics or factors would help 

ensure that the nexus between the issuer 

and worker is compensatory and the 

issuance of securities is not in 

connection with capital-raising or for 

speculative purposes? For example, 

should we require that the worker meets 

minimum annual or aggregate sales 

thresholds or that the worker has been 

engaged in performing platform-based 

activities for the issuer for a minimum 

period of time before she is eligible to 

receive shares under expanded Rule 701 

and Form S–8. Should we only permit 

securities that do not have capitalraising features, such as restricted stock 

units, to be issued to platform workers 

for platform-based activities that involve 

the sale of goods? 

c. Should we include offers and sales 

of securities to workers having other 

types of new work relationships? If so, 

which types of new work relationships 

should we include, and what 

characteristics or factors would help 

ensure that the nexus between the issuer 

and worker is compensatory and the 

issuance of securities is not in 

connection with capital-raising? Are 

there new work relationships that are 

not provided through an internet-based 

or other widespread, technology-based 

marketplace platform or system that we 

should include in the exemption? 

8. Should we require that a platform 

worker be a natural person or an entity 

meeting specified criteria to be able to 

receive securities pursuant to an 

expanded Rule 701 or Form S–8, as 

proposed? Should we instead require a 

platform worker to be a natural person? 

Do a significant number of platform 

workers currently operate through a 

business entity? If so, would a natural 

person requirement impact the extent to 

which they would continue to perform 

as platform workers or continue to do so 

through a business entity? Should we 

limit the types of business entities 

through which a platform worker would 

be able to operate? Should we permit an 

entity to be a platform worker, as 

proposed, if substantially all of its 

activities involve the performance of 

bona fide services that meet the 

requirements of proposed Rule 701(h), 

and the ownership interest of the entity 

is wholly and directly held by the 

natural person performing the services 

pursuant to the proposed rule? Are there 

different or additional eligibility 

conditions that we should adopt to 

allow platform workers to perform 

services as entities pursuant to the 

temporary rules? For example, should 

we permit more than one natural person 

to own the entity through which the 

services are being performed by the 

platform worker? If so, should we limit 

the number of natural persons that may 

own the entity or require that a coowner be the spouse or other family 

member? Should we condition allowing 

more than one natural person to own 

the entity by requiring each owner to 

perform the services of a platform 

worker? 

9. Should we require that an issuer 

operating a platform control the 

platform as a condition to using the 

Rule 701 exemption and Form S–8 

registration for issuances of securities to 

workers providing services through the 

platform, as proposed? Should we 


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57See proposed Rule 701(h)(3). 

58See proposed 17 CFR 239.16b(c)(1) and 

proposed General Instruction A.1(b)(2)(i) through 

(iii) to Form S–8. 

59One commenter specifically recommended 

imposing additional restrictions regarding the 

issuance of securities to platform workers beyond 

those typically applicable to equity issuances under 

Rule 701 because of the third-party, contractual 

relationship between the issuer and platform 

worker. See letter from Airbnb. 

60See proposed Rule 701(h)(3)(i). 

61See Preliminary Note 5 to Rule 701, which 

would remain applicable to issuances under 

proposed Rule 701(h).We are also proposing to add 

a similar note in proposed General Instruction 

A.1(b)(2) to Form S–8. 

62See Rule 701(c)(1)(ii) and (iii) [17 CFR 

230.701(c)(1)(ii) and (iii)], and General Instruction 

A.1(a)(1)(ii) and (iii) to Form S–8. 

63See 1999 Rule 701 Adopting Release, supra 

note 5, at Section II.D., and 1999 Form S–8 

Adopting Release (’’ at Sections I.A. and II.A. A 

number of commenters that addressed expanding 

our rules to encompass ‘‘gig economy’’ workers 

generally supported such a condition. See, e.g., 

letters from ABA, Airbnb, Chamber, and Uber. 

permit the use of the exemption for 

issuances to such workers if an issuer’s 

affiliate controls the platform? 

10. Should we require that services be 

provided pursuant to a written contract 

or agreement, as proposed? If so, should 

we include an express provision that the 

term ‘‘written contract or agreement’’ 

includes an electronic, internet-based 

contract or agreement? Should we 

provide the same provision for the term 

‘‘written compensation contract’’ in 

Rule 701(c)? 

11. Are the proposed conditions 

demonstrating control of the platform 

appropriate? Should we require that an 

issuer satisfy all of the specified 

conditions? Should we only require that 

an issuer have the ability to determine 

terms of use, including payment terms? 

Should we instead only require that an 

issuer have the ability to accept and 

remove the workers providing services 

through its platform? 

12. Are there other conditions, in 

addition to or in lieu of the proposed 

conditions, that we should adopt? 

13. Instead of, or in addition to, an 

issuer control requirement, are there 

other issuer eligibility conditions that 

we should adopt to help ensure that the 

issuance of securities to platform 

workers is for a compensatory purpose? 

For example, when the issuer’s platform 

is used to provide services to end-users, 

should we require that an issuer earn a 

substantial amount of its annual 

revenues from fees or other payments 

resulting from platform workers using 

the issuer’s platform? Would such a 

condition make it less likely that the 

issuance of securities to those workers 

would be for a capital-raising purpose? 

14. Should we expand the scope of 

Rule 701 and Form S–8 to include offers 

and sales of securities to former 

platform workers, including former 

platform workers of an entity acquired 

by an issuer, as proposed? Should such 

expansion include securities issued to 

former platform workers, including 

post-termination grants made in respect 

of prior service during the 12 months 

following the cessation of service, as 

proposed? Should we include under 

Form S–8 issuances to executors, 

administrators, or beneficiaries of the 

estates of deceased platform workers, or 

other persons similar to those included 

for deceased or incompetent former 

employees, as proposed? Should we 

amend Rule 701 to include a similar 

provision for the estates of deceased 

employees or deceased platform 

workers and representatives of 

incompetent former employees or 

incompetent former platform workers, 

as proposed? 

15. Would state blue-sky laws affect 

the operation of the proposed temporary 

platform worker exemption? If so, how? 

Are there changes we should consider to 

address state law issues? For example, 

should we provide for the preemption of 

state securities law registration 

requirements for offers made pursuant 

to Rule 701(h)? Are there other state law 

implications that would be relevant to 

consider in connection with the 

proposed amendments? For example, 

would the proposed temporary platform 

worker exemption have any 

implications regarding the 

enforceability of state laws pertaining to 

non-competition arrangements? Would 

the proposed exemption result in an 

increase in the use of non-compete 

provisions regarding issuers’ 

arrangements with platform workers? 

Would the proposed exemption affect 

the ability of issuers under state law to 

provide additional benefits to platform 

workers, such as minimum wage 

guarantees, healthcare stipends, and 

occupational auto insurance? 

B. Additional Requirements for 

Issuances to Platform Workers Under 

Rule 701 and Form S–8 

We are proposing four additional 

requirements with which an issuer must 

comply in order to use the exemption 

for issuances to platform workers under 

Rule 701.57 In addition, we are 

proposing that the first three of these 

conditions would also apply to 

issuances to platform workers registered 

on Form S–8.58

Because of certain structural 

differences between platform-based 

work relationships and traditional 

employer-employee relationships, we 

are mindful that compensatory offerings 

in this context may be more susceptible 

to misuse. For example, a traditional 

employer-employee work relationship 

will involve some degree of 

interpersonal interactions between the 

issuer and the employee by which the 

former supervises and monitors the 

work and conduct of the latter. In 

contrast, there may be no or very few 

interpersonal interactions in the issuerplatform worker relationship. In 

addition, platform workers frequently 

work for multiple companies and may 

have exclusive control over their work 

schedules, including how often and for 

how long they will work. These shortterm and/or intermittent work 

relationships across multiple issuers 

may increase the likelihood that 

workers would establish a work 

relationship with a platform as a means 

of realizing an investment opportunity 

with the issuer or that issuers would use 

the proposed provisions to engage in 

capital-raising activities. The additional 

requirements we are proposing are 

designed to work together to help 

ensure that issuances made to platform 

workers pursuant to revised Rule 701 

are for compensatory purposes while 

reducing any opportunity for a platform 

worker to use her relationship with the 

issuer to engage in speculative 

activity.59

The first condition is that the issuance 

must be pursuant to a compensatory 

arrangement that is evidenced by a 

written compensation plan, contract, or 

agreement between the issuer and the 

platform worker.60 The compensatory 

arrangement may not be for services 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. Thus, an issuer may 

not rely on the exemption to issue 

securities to a platform worker for 

compensation for performing services 

analogous to those of an underwriter or 

promoter or otherwise made in 

connection with a capital-raising 

transaction. An issuer also may not rely 

on the exemption to issue securities to 

a platform worker as part of a plan or 

scheme to evade the compensatory 

purpose of Rule 701 or otherwise evade 

the registration requirements of the 

Securities Act.61 This condition is based 

on the requirements under Rule 701 and 

Form S–8 currently applicable to 

consultants and advisors,62 which were 

designed to prevent abuse of the rules 

as conduits for unregistered securities 

distributions to the general public and 

for securities issuances to stock 

promoters.63


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64For example, if a platform worker received 

$1,000 in total compensation during a 12-month 

period from Issuer X for services provided to or for 

the benefit of Issuer X, no more than $150 of that 

compensation could consist of securities. These 

proposed annual limits on the amount of securities 

a platform worker could receive as compensation 

from an issuer are in addition to the limits on the 

aggregate sales price or amount of securities that an 

issuer can sell in reliance on Rule 701 during any 

consecutive 12-month period. See 17 CFR 

230.701(d). As discussed below, the Rule 701(d) 

limits would continue to apply, and an issuer 

would be required to aggregate issuances to 

platform workers with all other issuances under 

Rule 701 during a 12-month period for the purpose 

of complying with Rule 701(d). See infra Section 

II.C. 

65See proposed Rule 701(h)(3)(ii). 

66We expect that issuers would use the same 

valuation methods that they currently use to make 

valuations for compensatory issuances under Rule 

701(c). 

67 In this regard, an issuer’s use of multiple, 

different valuation methodologies during the same 

period could raise concerns that the issuer was 

doing so as part of a plan or scheme to evade the 

compensatory purpose of Rule 701. 

68Some commenters supported imposing a 

limitation on the amount of equity compensation a 

‘‘gig economy’’ worker could receive to prevent 

abuses under an expanded Rule 701 and Form S– 

8. See letters from ABA and Airbnb. 

69The Commission has historically expressed 

concern about the potential for abuse in the area of 

issuances of securities for compensation. See, e.g., 

1999 Rule 701 Adopting Release, 64 FR at 11098; 

see also Rule 701 Reproposing Release, 52 FR at 

29034. 70See proposed Rule 701(h)(3)(iii). 71One commenter recommended the adoption of 

this type of condition in order to prevent abuses 

from occurring under any expanded rules. See letter 

from Airbnb. This proposed condition is also 

consistent with the ‘‘no sale’’ position taken by the 

staff that, where securities are awarded to 

employees at no direct cost through broad-based 

bonus plans, there has been no sale, and therefore 

no public distribution of the securities, since 

employees do not individually bargain to contribute 

cash or other tangible or definable consideration to 

such plans. See Changes to Exchange Act 

Registration Requirements to Implement Title V and 

Title VI of the JOBS Act, Release No. 33–10075 

(May 3, 2016) [81 FR 28689 (May 10, 2016)]. 

72See proposed 17 CFR 239.16b(c)(1) and 

proposed General Instruction A.1.(a)(3) to Form S– 

8. 

73See proposed Rule 701(h)(3)(iv). 

74See 17 CFR 230.701(g)(1) and (2). 

75See proposed Rule 701(h)(3)(iv). 

76Letter from Airbnb. 

77See supra note 59 and accompanying text. 

78See proposed Rule 701(h)(3)(iv). Following that 

90-day period, persons who are not affiliates may 

resell Rule 701 securities in reliance on 17 CFR 

230.144 without compliance with the current 

public information requirements under 17 CFR 

230.144(c) and holding period requirements under 

17 CFR 230.144(d), and affiliates may resell such 

securities without compliance with the holding 

period requirements. 

79For example, to be eligible to use Form S–8, the 

issuer must be a reporting issuer and must have 

filed all reports and other materials required to be 

filed during the preceding 12 months (or for such 

shorter period that the registrant was required to 

file such reports and materials). 

Second, as proposed, 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 such 

compensation received from the issuer 

during a consecutive 36-month period, 

may consist of securities issued 

pursuant to Rule 701 or a registration 

statement on Form S–8.64 The issuer 

would be required to determine the 

value of such securities as of the time 

the securities are granted.65 For the 

purpose of assessing compliance with 

these limits, an issuer would be able to 

use any reasonable, recognized 

valuation methodology 66 as long as the 

methodology is consistently applied 

during the same 12-month or 36-month 

period.67

This proposed cap on the amount of 

compensation that a platform worker 

may receive as securities from the issuer 

is designed to limit an issuer’s incentive 

and ability to use the new exemptive 

rule as a conduit for a public 

distribution of its securities, contrary to 

the compensatory purpose of Rule 701 

and Form S–8.68 In addition, we believe 

the proposed cap would reduce any 

incentive for platform workers to use 

the exemption primarily for realizing 

speculative investment opportunities 

and would limit the risk that issuances 

would be for capital-raising or other 

non-compensatory purposes.69

Third, we are proposing that the 

amount and terms of any securities 

issued to a platform worker may not be 

subject to individual bargaining. 

Similarly, as proposed, platform 

workers would not be permitted to elect 

between payment in securities or cash.70

We believe this proposed requirement 

would also reduce any incentive for 

platform workers to use the exemption 

as a means of realizing speculative 

investment opportunities rather than 

receiving the securities as a 

compensatory grant.71

The preceding three conditions would 

apply equally to securities issuances to 

platform workers under both Rule 701 

and Form S–8.72 For purposes of Rule 

701, however, we are proposing a fourth 

condition that 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.73 Such 

reasonable steps could include the 

placement of special legends on the 

securities to be issued to platform 

workers or appropriate instructions to 

transfer agents that would provide 

adequate notice of the transfer 

prohibition to platform workers. The 

purpose of this provision is to help 

ensure that the shares are obtained for 

compensatory and not speculative 

purposes. Specifically, it would prevent 

the development of a market in such 

securities until after the issuer becomes 

subject to the reporting requirements of 

Section 13 or 15(d) of the Exchange Act, 

which would in turn greatly reduce, if 

not eliminate, any incentive for a 

worker to seek out securities issued 

pursuant to Rule 701 for speculative 

purposes. 

Currently, all securities issued 

pursuant to Rule 701 are ‘‘restricted 

securities,’’ and any resales must 

comply with Securities Act registration 

requirements or qualify for an 

exemption therefrom.74 As proposed, 

the additional transferability prohibition 

on Rule 701 securities issued to 

platform workers would preclude any 

transfers, except transfers back to the 

issuer or by operation of law.75

Transfers by operation of law would 

include, for example, transfers pursuant 

to the laws of descent and distribution 

and domestic relations orders in 

divorces. One commenter recommended 

the adoption of enhanced transfer 

restrictions for securities issued to gig 

economy workers beyond those 

applicable to equity currently issuable 

pursuant to Rule 701 because of the 

third-party contractual relationship 

between gig economy participants and 

gig economy companies.76 As noted 

earlier, we agree that applying enhanced 

transfer restrictions is appropriate in 

light of the more remote contractual 

relationship between an issuer and its 

platform workers, compared to the 

relationship with its employees.77 As 

with other securities issued pursuant to 

Rule 701, however, ninety days after the 

issuer becomes subject to Exchange Act 

reporting requirements, securities 

issued to platform workers would 

become available for resale under 17 

CFR 230.701(g)(3).78

We are not proposing similar transfer 

restrictions for securities issued to 

platform workers pursuant to a Form S– 

8 registration statement. Securities Act 

and Exchange Act protections for such 

securities would already exist, making 

the use of the issued securities for 

speculative purposes by a platform 

worker less likely.79

Request for Comment 

16. Would the proposed conditions 

for issuances to platform workers under 

Rule 701 or Form S–8 help ensure that 

the issuances are for a compensatory 

purpose? Should we adopt only some of 

the conditions? If so, which ones? For 

example, should we require only that 

the issuance be pursuant to a 

compensatory arrangement for services 


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not in connection with the offer or sale 

of securities in a capital-raising 

transaction? 

17. Should we impose a cap on the 

amount of compensation that a platform 

worker may receive as securities from 

the issuer on an annual basis under Rule 

701 and Form S–8 to limit the potential 

that the issuance to platform workers 

would be used for capital-raising or 

speculative purposes, as proposed? If so, 

should we require that no more than 15 

percent of the value of compensation 

received by a platform worker from the 

issuer for services provided during a 12- 

month period be in securities, as 

proposed? Should the annual cap be 

less than or greater than 15 percent of 

the compensation received by the 

platform worker during a 12-month 

period? Should the annual cap apply 

only to issuances under Rule 701 rather 

than both Rule 701 and Form S–8? 

Should the annual cap apply only to 

issuances under Form S–8? 

18. Should we impose a cap on the 

amount of compensation that a platform 

worker may receive as securities from 

the issuer during a 36-month period 

(under Rule 701 and registered on Form 

S–8) to limit the potential that the 

issuance to platform workers would be 

used for capital-raising or speculative 

purposes, as proposed? Should we 

require that no more than $75,000 of 

such compensation received from the 

issuer during a 36-month period may 

consist of securities, as proposed? 

Should this cap be less than or greater 

than $75,000, and/or apply to a shorter 

or longer period than 36 months? For 

example, should we limit the amount of 

securities a platform worker may receive 

as compensation from an issuer to no 

more than $50,000 for a consecutive 24- 

month period? Instead of, or in addition 

to, the 36-month cap, should there be an 

aggregate limit on the dollar amount of 

securities that a platform worker may 

ever receive from an issuer? If so, what 

should that cap be? Should the $75,000 

cap apply only to issuances under Rule 

701? Should the $75,000 limitation 

apply only for as long as the issuer is 

not subject to the reporting 

requirements of Section 13 or 15(d) of 

the Exchange Act? Should the $75,000 

cap apply only to issuances registered 

on Form S–8? 

19. Should we impose only the 

proposed 12-month cap or only the 

proposed 36-month cap, but not both? 

Should we not impose any cap on the 

amount of compensation that a platform 

worker may receive as securities in light 

of other proposed conditions? Should 

either cap apply to limit the total 

amount of compensation issued as 

securities to platform workers by an 

issuer as well as an issuer’s affiliates, or 

should either cap apply individually to 

each issuer or issuer’s affiliate? 

20. For purposes of the 12- and 36- 

month caps on the amount of 

compensation that a platform worker 

may receive as securities from the 

issuer, should the value of 

compensation be measured at the time 

the securities are granted, as proposed? 

For the same purposes, should an issuer 

be able to use any reasonable, 

recognized valuation methodology for 

purposes of determining the fair market 

value of the securities issued to platform 

workers under Rule 701? Should an 

issuer be able to change the valuation 

methodology used for purposes of the 

proposed caps as long as the change is 

motivated by bona fide reasons 

unrelated to the proposed exemption for 

platform workers? 

21. Should we specify in Rule 701 

and Form S–8 that the issuer must use 

the same valuation method that it 

currently uses to make valuations for 

compensatory issuances under Rule 

701(c), if applicable, and apply the 

methodology consistently during the 

same period? 

22. Should we require that 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, as 

proposed? If a platform worker is unable 

to negotiate the amount and terms of 

securities to be issued as compensation, 

should that worker be able to elect to 

receive payment only in cash? 

23. For issuances pursuant to the Rule 

701 exemption, should we require the 

issuer to take reasonable steps to 

prohibit the transfer of securities issued 

to platform workers, other than to the 

issuer or by operation of law, as 

proposed? Should we limit the 

prohibition on transferability to a 

specific period, e.g., for two or three 

years? Should we mandate the specific 

steps that an issuer must take to prohibit 

the transfer of such securities? If so, 

what should those steps be? For 

example, should we require that issuers 

put special legends on the securities 

issued to platform workers, or should 

we require that issuers provide 

appropriate instructions to transfer 

agents concerning the transfer 

prohibition on shares issued to platform 

workers? Are there other reasonable 

steps that we should require an issuer 

to take in connection with the proposed 

prohibition on transferability to help 

ensure that the shares issued to platform 

workers are for compensatory and not 

speculative purposes? 

24. Instead of requiring an issuer to 

take reasonable steps to prohibit the 

transfer of securities issued to platform 

workers, should we instead allow 

platform workers to resell their 

securities using an applicable 

exemption or safe harbor? For example, 

should platform workers be allowed to 

resell their securities pursuant to Rule 

144? Alternatively, in Rule 701(h), 

should we require a different holding 

period than is in Rule 144, such as a 

two-year holding period, or is any 

holding period insufficient to mitigate 

concerns about misuse of the temporary 

exemption? Are there other transfer 

restrictions that would be more 

appropriate in this context? 

25. Should we apply the proposed 

conditions only to securities that have 

capital-raising features (e.g., stock 

options) and not to securities that do not 

have such features (e.g., restricted stock 

units)? If so, which of the proposed 

conditions should not apply to such 

securities? 

26. Should we limit the type of 

securities that can be issued to platform 

workers under Rule 701 or on Form S– 

8? For example, should we limit 

issuances to equity securities and 

securities convertible into or 

exchangeable for equity securities? 

27. Are there other conditions in 

addition to, or instead of, the proposed 

conditions that we should adopt to help 

ensure that issuances to platform 

workers under Rule 701 or registered on 

Form S–8 are undertaken for 

compensatory and not capital-raising or 

speculative purposes? For example, 

should we require that a platform 

worker provide services through an 

issuer’s platform (or other widespread, 

technology-based marketplace platform 

or system) for a certain period of time 

before the worker is eligible to receive 

securities from the issuer? If so, should 

the minimum period be six months, one 

year, or some other period? Should we 

require that the platform worker provide 

services for a continuous period of time? 

Should we require that the securities 

issued to a platform worker not vest 

until after a particular period of time? If 

so, should the vesting period be six 

months, one year, or some other period 

after the grant of securities? 

28. Do the additional conditions for 

issuances to platform workers provide 

adequate investor protections for 

platform workers who receive shares 

pursuant to Rule 701 or registered on 

Form S–8? If not, what additional 

conditions or measures would be 

appropriate to provide an acceptable 

level of investor protection? 


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80See 17 CFR 230.701(d)(2), which imposes 

alternative caps on the aggregate sales price or 

amount of securities sold under the rule during a 

consecutive 12-month period. In the companion 

Rule 701/Form S–8 release, we are proposing to 

raise: The cap under 17 CFR 230.701(d)(2)(i) 

permitting issuance from $1 million to $2 million, 

to reflect inflation; and the cap under 17 CFR 

230.701(d)(2)(ii) from 15% to 25% of the issuer’s 

total assets, to reflect that start-up companies may 

be more dependent upon human capital than fixed 

assets. See Release No. 33–10891 at Section II.B. 

81 In the companion release, we are proposing to 

require that Rule 701(e) enhanced disclosure be 

provided only for those sales that exceed the rule’s 

$10 million threshold. See Release No. 33–10891 at 

Section II.A.1. If adopted, this provision would be 

applicable to all Rule 701-exempt issuances, 

including those granted to platform workers. 

82 In the companion release, we are proposing 

amendments to the disclosure requirements under 

Rule 701(e) that, if adopted, would be applicable to 

issuances to platform workers under proposed Rule 

701(h). For example, we are proposing to conform 

the age of financial statement requirement in Rule 

701(e) to the corresponding requirement in Part 

F/S of Form 1–A. See Release No. 33–10891 at 

Section II.A.2. In addition, we are proposing to 

allow issuers to provide alternative valuation 

information, similar to that required under Internal 

Revenue Code Section 409A, in lieu of financial 

statements, for purposes of Rule 701(e) disclosure. 

See id. at Section II.A.4. 

83 15 U.S.C. 78l(g)(1). Section 12(g)(1) requires, 

among other things, that an issuer with assets 

exceeding $10,000,000 and a class of equity 

securities held of record by either 2,000 persons, or 

500 persons who are not accredited investors, 

register such class of securities with the 

Commission. 

84See 17 CFR 240.12g5–1(a)(8). The Commission 

adopted this provision of Rule 12g5–1 pursuant to 

Section 503 of the JOBS Act, which instructed the 

Commission to amend the definition of ‘‘held of 

record’’ to exclude securities held by persons who 

received them pursuant to an ‘‘employee 

compensation plan’’ in transactions exempted from 

the registration requirements of Section 5 of the 

Securities Act. Section 503 also instructed the 

Commission to adopt a safe harbor that issuers can 

use when determining whether holders of their 

securities received them pursuant to an employee 

compensation plan in transactions exempted from 

the registration requirements of Section 5 of the 

Securities Act. The Commission adopted the term 

‘‘employee compensation plan’’ and left it 

undefined so that ‘‘issuers will have appropriate 

flexibility to make a principles based determination 

about securities received as employee 

compensation when determining their holders of 

record under Section 12(g)(5).’’ See Release No. 33– 

10075. 

85See 17 CFR 240.12g5–1(a)(8)(ii)(A). 

86Two commenters supported excluding platform 

workers from the definition of record holder under 

Rule 12g5–1. See letters from Airbnb and Davis 

Polk. 

87Similar to the current Rule 12g5–1 exclusion 

for securities issued pursuant to an employee 

C. Integration of Proposed Rule 701(h) 

With the Existing Rule 701 Exemption 

Title 17, section 230.701(d) (‘‘Rule 

701(d)’’) imposes limits on the aggregate 

sales price or amount of securities that 

an issuer can sell in reliance on the rule 

during any consecutive 12-month 

period.80 In addition, 17 CFR 230.701(e) 

(‘‘Rule 701(e)’’) provides that if the 

aggregate sales price or amount of 

securities sold during any consecutive 

12-month period exceeds $10 million, 

the issuer must deliver certain 

disclosure to investors a reasonable 

period of time before the date of sale.81

Proposed Rule 701(h) would not 

create a separate and independent 

ceiling on the amount of securities that 

could be offered or sold under Rule 701. 

Rather, platform workers would be an 

additional class of persons temporarily 

eligible under Rule 701(c) to participate 

in the issuer’s Rule 701 offers and sales, 

and would be subject to the same Rule 

701(d) limitations on the total amount of 

securities that an issuer may sell. In this 

regard, the securities sold to platform 

workers would be aggregated with all 

other securities sold by the issuer to 

persons meeting existing Rule 701(c) 

eligibility conditions for purposes of 

applying the Rule 701(d) ceiling. 

We believe that it is appropriate to 

apply the same ceiling to all Rule 701 

exempt offerings rather than to provide 

a separate ceiling for offers to persons 

eligible to receive securities under the 

temporary provision. If we were to 

provide separate ceilings, issuers with 

technology-based marketplace platforms 

would be able to sell securities in excess 

of the amount they are permitted to sell 

to traditional workers, while issuers that 

rely only on traditional employment 

would be limited to the ceiling imposed 

under Rule 701(d). We believe it is 

better to propose an approach that treats 

all issuers equally, rather than one that 

favors issuers conducting their 

businesses through platforms as defined 

by the proposed rule. 

Similarly, an issuer that offered and 

sold securities to platform workers 

pursuant to proposed Rule 701(h) would 

be subject to the same Rule 701(e) 

disclosure requirements. Those 

securities would be aggregated with all 

other securities offered and sold by the 

issuer to persons meeting existing Rule 

701(c) eligibility conditions for 

purposes of applying the $10 million 

disclosure threshold in Rule 701(e).82

Request for Comment 

29. Should we require that the 

securities sold to platform workers be 

aggregated with all other securities sold 

by the issuer to persons meeting existing 

Rule 701(c) eligibility conditions for 

purposes of applying the Rule 701(d) 

ceiling, as proposed? Should we instead 

impose a separate and independent 

ceiling on the amount of securities that 

an issuer could sell to platform workers 

during any consecutive 12-month 

period? If so, what should the ceiling 

be? 

30. Should we require that the 

securities issued to platform workers be 

aggregated with all other securities sold 

by the issuer to persons meeting existing 

Rule 701(c) eligibility conditions for 

purposes of applying the Rule 701(e) 

disclosure threshold, as proposed? 

Should we instead impose a separate 

disclosure threshold for issuances to 

platform workers? If so, what should 

that threshold be? 

D. Integration With Exchange Act Rule 

12g5–1 

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 Exchange Act,83 17 CFR 

240.12g5–1 (‘‘Rule 12g5–1’’) permits the 

exclusion of certain securities.84

Specifically, 17 CFR 240.12g5– 

1(a)(8)(i)(A) permits the exclusion of 

securities held by persons who received 

the securities pursuant to an employee 

compensation plan in transactions 

exempt from, or not subject to, the 

registration requirements of Securities 

Act Section 5. Title 17, section 

240.12g5–1(a)(8)(i)(B) permits the 

exclusion of securities held by persons 

who received the securities in a 

transaction exempt from, or not subject 

to, the registration requirements of 

Securities Act Section 5 from the issuer, 

a predecessor of the issuer or an 

acquired company in substitution or 

exchange for securities received 

pursuant to a compensatory plan in 

transactions exempt from, or not subject 

to, the registration requirements of 

Securities Act Section 5, as long as the 

persons were eligible to receive 

securities pursuant to Rule 701(c) at the 

time the excludable securities were 

originally issued to them. In addition, 

Rule 12g5–1 provides a non-exclusive 

safe harbor by which an issuer may 

deem a person to have received the 

securities pursuant to an employee 

compensation plan if such plan and the 

person who received the securities 

pursuant to the plan met the plan and 

participant conditions of Rule 701(c).85

We are proposing similar treatment 

for issuances to platform workers under 

proposed Rule 701(h).86 We believe that 

these proposed amendments to Rule 

12g5–1 are appropriate because they 

would remove a potential disincentive 

to an issuer’s offer and sale of securities 

as compensation to platform workers 

and would avoid favoring companies 

that do not have platform workers over 

companies that have them. Specifically, 

the proposed revisions would eliminate 

the requirement for an issuer to count 

platform workers who receive shares 

pursuant to a compensation plan 87


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compensation plan, we propose to use and leave 

undefined the term ‘‘compensation plan’’ to provide 

issuers with the appropriate flexibility to make a 

principles based determination about securities 

issued as compensation to their platform workers 

when determining their holders of record under 

Section 12(g)(5). Not defining a ‘‘compensation 

plan’’ for platform workers would also avoid 

unnecessary complexity and potential conflict with 

existing terms, such as ‘‘compensatory benefit 

plan.’’ See Release No. 33–10075, 81 FR at 28694. 

88See proposed Exchange Act Rule 12g5– 

1(a)(8)(i)(A). 

89See proposed Exchange Act Rule 12g5– 

1(a)(8)(i)(B). 

90See proposed Exchange Act Rule 12g5– 

1(a)(8)(ii)(A)(2). The Rule 12g5–1 safe harbor would 

continue to provide that an issuer may, solely for 

the purposes of Exchange Act Section 12(g), deem 

the securities to have been issued in a transaction 

exempt from, or not subject to, the registration 

requirements of Securities Act Section 5 if the 

issuer had a reasonable belief at the time of the 

issuance that the securities were issued in such a 

transaction. See 17 CFR 240.12g5–1(a)(8)(ii)(B). 

91See proposed Note 1 to paragraph (a)(8)(ii) of 

Rule 12g5–1. 

92See 1999 Form S–8 Adopting Release, supra 

note 12, at 11103; see also 1990 Form S–8 Adopting 

Release, supra n. 14. 93See Form S–8, Part I, Item 2. 94See Form S–8, Part II, Item 3. 95See, e.g., 1999 Form S–8 Adopting Release, 

supra note 12, at 11103. The Commission has also 

justified the abbreviated disclosure format of Form 

S–8 because of ‘‘employees’ familiarity with the 

issuer’s business through the employment 

relationship.’’ Id. 

96See proposed Rule 428(d). 

97See infra Section II.G. 

under Rule 701(h) as record holders for 

the purpose of determining its Section 

12(g) registration obligations.88 In 

addition, similar to the existing 

exclusion in 17 CFR 240.12g5– 

1(a)(8)(i)(B), the proposed amendment 

would exclude securities received in a 

transaction exempt from, or not subject 

to, the registration requirements of 

Securities Act Section 5 in substitution 

or exchange for securities received 

pursuant to Rule 701, as long as the 

persons were eligible to receive the 

securities when they were originally 

issued to them.89 Finally, the proposed 

amendments would extend the safe 

harbor in 17 CFR 240.12g5–1(a)(8)(ii), 

for securities received in a Rule 701(c) 

offering, to compensatory issuances to 

platform workers pursuant to Rule 

701(h).90

The proposed amendments to Rule 

12g5–1 would also include a note to 

remind issuers of the temporary nature 

of Rule 701(h).91 Upon expiration of 

Rule 701(h), without further 

Commission action, an issuer would no 

longer be able to issue additional Rule 

701-exempt securities to its platform 

workers. Importantly, however, we are 

not proposing the Rule 12g5–1 

exclusion and safe harbor for securities 

issued to platform workers on a 

temporary basis. Therefore, an issuer 

could continue to rely on the exclusion 

and safe harbor subsequent to Rule 

701(h)’s expiration date. 

Request for Comment 

31. Should we permit an issuer to 

exclude platform workers to which it 

has issued securities under Rule 701(h) 

from the definition of ‘‘holders of 

record’’ for the purpose of determining 

its registration obligations under Section 

12(g), as proposed? 

32. Should we extend the Rule 

12g5–1 safe harbor to cover issuances to 

platform workers under Rule 701(h) 

pursuant to a compensation plan, as 

proposed? 

33. Should we leave ‘‘compensation 

plan’’ for platform workers undefined, 

as proposed? If not, how should we 

define a ‘‘compensation plan’’ for 

platform workers? 

E. Considerations Specific to Form S–8 

Form S–8 provides a number of 

accommodations to registrants that seek 

to register the offer and sale of securities 

to their employees, consultants, and 

advisors.92 For example, to satisfy the 

Securities Act prospectus delivery 

requirements set forth in Rule 428, the 

form requires only abbreviated 

disclosure and permits the delivery of 

regularly prepared materials advising 

employees and other eligible persons 

about employee benefit plans, together 

with a statement of availability of 

documents containing registrant 

information.93 Form S–8 also permits 

the incorporation by reference of a 

registrant’s Exchange Act reports 

without regard to the length of the 

issuer’s reporting history or the 

aggregate market value of its securities 

held by the non-affiliated public (its 

‘‘public float’’).94 The Commission has 

justified this differing treatment for 

Form S–8 offerings because of their 

compensatory, incentivizing, and noncapital-raising purpose.95

We propose to amend Form S–8 so 

that the accommodations available to 

registrants currently offering securities 

on that form to employees and other 

covered persons would generally be 

available to registrants offering 

securities to platform workers. We also 

propose to amend Rule 428 so that its 

prospectus content, delivery, updating, 

and related procedural requirements are 

applicable to offerings to platform 

workers pursuant to a written 

compensation plan, contract, or 

agreement. Thus, a registrant registering 

an offering of securities to platform 

workers on Form S–8 would be able to 

deliver a Section 10(a) prospectus 

consisting of plan or compensation 

contract information, a statement of 

availability of registrant information, 

and other documents required of current 

Form S–8 registrants, and follow the 

same Form S–8 procedural 

requirements.96 We believe that the 

proposed conditions designed to help 

ensure that an offering to such workers 

is for a compensatory purpose justify 

extending the same treatment to issuers 

seeking to register an offering of 

securities to platform workers on Form 

S–8. 

Many of the substantive plan 

disclosure requirements for Form S–8 

pertain to tax qualified defined 

contribution plans. We believe, 

however, that issuers that elect to 

register an offering of securities on Form 

S–8 for issuance to platform workers 

would do so to incentivize those 

workers in the short-term by offering 

options and restricted stock units, rather 

than pursuant to a defined contribution 

plan for the purpose of retirement 

savings. Accordingly, we are not 

proposing amendments to those items of 

Form S–8 that pertain to defined 

contribution plans to include platform 

workers. 

Request for Comment 

34. Platform workers may not be as 

familiar with the registrant’s operations 

as employees and other persons 

currently eligible to receive securities 

under Form S–8 may be. As such, 

should registrants offering securities to 

platform workers be subject to different 

information content, prospectus 

delivery, or other procedural 

requirements than those applicable to 

current Form S–8 registrants? If so, what 

additional requirements under Form 

S–8 or Rule 428 or what different or 

additional disclosure requirements 

should apply to offerings to platform 

workers? 

35. Are there circumstances in which 

registrants would issue securities to 

platform workers pursuant to defined 

contribution plans? If so, should we 

amend those items of Form S–8 that 

pertain to defined contribution plans to 

include platform workers? 

F. Requirement To Furnish Certain 

Information 

As explained in detail below, the 

proposed expansion of Rule 701 and 

Form S–8 to include securities 

issuances to platform workers would be 

temporary.97 Related to this, we are also 

proposing a requirement that an issuer 

furnish certain information to the 

Commission. If the proposed 

amendments are adopted, we plan to 

use this information to assist us in 

evaluating the expanded use of Rule 701 


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98 15 U.S.C. 78r. 

99See proposed Rule 701(h)(4) and proposed 17 

CFR 239.16b(c)(3). The amounts calculated as a 

percentage should compare the amount of securities 

issued to platform workers under Rule 701 or Form 

S–8 with the total amount of securities issued to all 

workers (both platform and non-platform) and other 

covered persons under Rule 701 or on Form S–8. 

100Under Rule 83, an issuer can request that the 

non-public information not be disclosed pursuant 

to a request under the Freedom of Information Act 

(‘‘FOIA’’). Written requests for confidential 

treatment under Rule 83 relating to the furnished 

materials may be submitted either in paper format 

or electronically. If there are no FOIA requests, the 

information will remain non-public for 10 years. 

After 10 years, the confidential treatment request 

will expire unless an issuer requests and is granted 

an extension. In the event of a FOIA request, the 

Commission may require the issuer to provide 

substantiation of its confidential treatment request. 

101See proposed Rule 701(h)(5) and proposed 17 

CFR 239.16b(c)(4). 

102As previously discussed, the exemption would 

continue to be available to issuers for the postexpiration issuance of securities underlying options 

previously issued in an exempt transaction 

pursuant to Rule 701(h). See supra note 41 and 

accompanying text. In addition, as previously 

noted, an issuer could continue to rely on the Rule 

12g5–1 exclusion and safe harbor for securities 

issued to its platform workers prior to the 

expiration of Rule 701(h) and continue to exclude 

those workers as record holders subsequent to Rule 

701(h)’s expiration date. See supra Section II.D. 

and Form S–8, in order to help 

determine whether to permit such use 

on a permanent basis and under the 

same or different conditions. The 

information should provide insight into 

how, and to what extent, the 

exemptions are being used, as well as 

the extent and type of benefits provided 

to issuers, platform workers, and other 

investors. This would enable us to 

assess the utility of the issuances of 

securities to platform workers under 

Rule 701 or Form S–8 and to assess 

whether the proposed conditions have 

achieved their purpose of helping to 

prevent non-compensatory issuances. 

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. Thus, a 

failure to furnish the information would 

not result in the loss of the proposed 

exemption in Rule 701 or Form S–8 

eligibility for issuances to platform 

employees. The information would, 

however, be important for determining 

whether the exemptions should expire, 

be extended, or be made permanent. 

The required information would be 

furnished, rather than filed, and 

therefore would not be subject to 

potential liability under Section 18 of 

the Exchange Act.98 The information 

would be intended only for the 

Commission’s use and would be nonpublic. It would not be furnished 

through the Commission’s Electronic 

Data Gathering, Analysis, and Retrieval 

(EDGAR) system. Rather, it would be 

furnished in a non-public manner 

designated by the Division of 

Corporation Finance for this purpose, 

for example, electronically by email or 

by some other means of electronic 

communication. 

As proposed, the issuer would be 

required to provide the following 

information concerning its issuances to 

platform workers to the Commission at 

six-month intervals commencing six 

months after the first such issuance: 

1. 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 any revisions to such criteria, 

are communicated to workers in 

advance as an incentive; 

2. The type and terms of securities 

issued to platform workers during the 

prior six months, and whether they are 

the same as for other securities issued 

in compensatory transactions by the 

issuer during that interval; 

3. If issuing securities pursuant to 

Rule 701(h), the steps taken to ensure 

that the securities sold are nontransferable; 

4. The percentage of overall 

outstanding securities that the amount 

issued to platform workers cumulatively 

under Rule 701(h) or pursuant to a 

registration statement on Form S–8 

(pursuant to § 239.16b(c)), as applicable, 

represents; 

5. During the interval, the number of 

platform workers, the number of nonplatform workers, the number of 

platform workers receiving securities 

pursuant to the temporary rule, and the 

number of non-platform workers who 

received securities pursuant to the 

issuer’s Rule 701 or Form S–8 sales; and 

6. The number and dollar amount of 

securities issued to platform workers 

under Rule 701 or pursuant to a 

registration statement on Form S–8, 

both in absolute amounts and as a 

percentage of the issuer’s total sales 

under Rule 701 or total sales pursuant 

to a registration statement on Form 

S–8, as applicable during the interval.99

We recognize that some non-reporting 

issuers may view certain information 

concerning compensation practices for 

platform workers as privileged or 

confidential. For that reason, the 

proposed rules would provide that to 

the extent that the issuer treats such 

information as privileged or 

confidential, it may submit a 

confidential treatment request pursuant 

to 17 CFR 200.83 100 for the furnished 

information.101

Request for Comment 

36. Should the temporary rules 

require an issuer to furnish certain 

information to the Commission if it 

seeks to register issuances to platform 

workers on Form S–8, as proposed? If 

so, should an issuer be required to 

furnish the information at six-month 

intervals, as proposed? Should the 

issuer be required to furnish the 

information annually or on another 

periodic basis? If so, which periodic 

basis would be appropriate? 

37. Should the same reporting interval 

apply to issuances of securities both 

under Rule 701 and pursuant to a 

registration statement on Form S–8? 

38. Is the proposed information 

appropriate for the purpose for which it 

is being sought? Should issuers be 

required to furnish less information or 

other information in addition to, or 

instead of, the proposed information? 

39. What method should the 

Commission require issuers to use to 

furnish the information required? For 

example, should the information be 

furnished electronically via email for 

this purpose? Should the Commission 

provide a form for this purpose? 

Are there other steps that the 

Commission should take to facilitate the 

reporting requirement? 

40. Should we require that an issuer 

notify the Commission that it intends to 

make offers or sales to platform workers 

pursuant to the exemption in proposed 

Rule 701(h)? If so, when and how 

should issuers be required to provide 

such notice? 

G. Expiration of the Temporary Rules 

Authorizing Issuances to Platform 

Workers Under Rule 701 and Form 

S–8 

With limited exceptions, we propose 

to make this exemptive rule temporary 

in order to have an opportunity to 

evaluate the appropriateness of 

extending the Rule 701 exemption to 

issuances to workers in this relatively 

new type of work arrangement, 

including whether such issuances are 

being made for compensatory, incentive, 

and non-capital-raising purposes.102

Moreover, given the rapid pace of 

technological change, particularly in the 

area of the internet and platform 

software, and the evolving nature of the 

platform worker labor market, making 

the expanded Rule 701 exemption 

temporary would also provide us with 

the opportunity, subject to public notice 

and comment, to implement 

amendments to this area of the 


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103 In the event that the Commission determines 

to let the exemption expire, we anticipate 

addressing any transition or related issues at that 

time. 

104But see supra note 102. 

105Unlike the proposed amendment to Rule 701, 

the proposed amendment to Form S–8 does not 

include a transfer prohibition. We discuss the 

anticipated economic effects of this difference 

below. 

106Section 2(b) of the Securities Act [15 U.S.C. 

77b(b)] and Section 3(f) of the Exchange Act [15 

U.S.C. 78c(f)] requires the Commission, when 

engaging in rulemaking where it is required to 

consider or determine whether an action is 

necessary or appropriate in the public interest, to 

consider, in addition to the protection of investors, 

whether the action will promote efficiency, 

competition and capital formation. Further, Section 

23(a)(2) of the Exchange Act [15 U.S.C. 78w(a)(2)] 

requires the Commission, when making rules under 

the Exchange Act, to consider the impact that the 

rules would have on competition, and prohibits the 

Commission from adopting any rule that would 

impose a burden on competition not necessary or 

appropriate in furtherance of the Exchange Act. 

exemptive framework in light of such 

technological and labor market changes. 

As proposed, Rule 701(h) would 

apply only to offers and sales of 

securities occurring within five years 

following the date of the rule’s 

effectiveness. On that date, Rule 701(h) 

would expire and no longer be 

effective.103 Prior to the expiration date, 

the Commission may decide to let the 

exemption expire, extend the temporary 

exemption, or adopt the exemption on 

a permanent basis. If the Commission 

extends the exemption or adopts it on 

a permanent basis, it may also consider 

whether any revisions to the rule are 

appropriate. We believe that five years 

is an appropriate period for the 

temporary exemption. On the one hand, 

it would provide issuers with sufficient 

time to develop and conduct successful 

securities offerings to platform workers, 

the demand for which initially may not 

be readily apparent. On the other hand, 

the limited period would allow the 

Commission to evaluate the temporary 

exemption and make necessary 

adjustments in response to 

technological, labor market, or other 

changes. 

The rule authorizing the temporary 

use of Form S–8 for issuances to 

platform workers (17 CFR 239.16b(c)) 

would also expire five years from the 

date of that rule’s effectiveness, which 

we expect would be the same date as the 

expiration date for Rule 701(h). Rule 

428(d), the temporary rule authorizing 

the application of the same streamlined 

disclosure, prospectus delivery, and 

related procedural requirements to 

issuances to platform workers as those 

currently applicable to other Form S–8 

issuances, would expire on the same 

date as 17 CFR 239.16b(c). 

Request for Comment 

41. Should we adopt each of proposed 

Rule 701(h), the proposed amendment 

to Form S–8 (17 CFR 239.16b(c)), and 

proposed Rule 428(d) as temporary 

rules, as proposed? If we do, should the 

rules expire five years from the date of 

their effectiveness, as proposed? Should 

the rules expire on a different date (e.g., 

one, two, three, or four years from the 

date of effectiveness)? 

42. Should we permit an issuer, 

following expiration of Rule 701(h), to 

issue securities underlying options, 

warrants, or rights that were previously 

issued to platform workers in an exempt 

transaction pursuant to Rule 701(h), as 

proposed? 

43. Should we make the expiration 

date for the temporary Form S–8 

provisions different from the expiration 

date for issuances under Rule 701(h)? If 

so, should the effective period of the 

Form S–8 provisions be longer or 

shorter than the effective period of Rule 

701(h)? 

44. Should the proposed extension of 

Rule 701 and Form S–8 to platform 

workers expire absent further 

Commission action, as proposed? Are 

there any transition or related issues 

(e.g., related to transfer restrictions) that 

we should address in connection with 

the proposed expiration of the 

temporary rules? 

45. Rather than making the rules 

temporary,104 should we adopt any of 

the proposed rules on a permanent 

basis? If so, which ones? 

III. General Request for Comments 

We request and encourage any 

interested person to submit comments 

on any aspect of the proposed 

amendments, other matters that might 

have an impact on the proposed 

amendments, and any suggestions for 

additional changes. With respect to any 

comments, we note that they are of 

greatest assistance to our rulemaking 

initiative if accompanied by supporting 

data and analysis of the issues 

addressed in those comments and by 

alternatives to our proposals where 

appropriate. 

IV. Economic Analysis 

The Commission is proposing 

amendments to Rule 701 to establish a 

temporary provision that, on a trial 

basis, would expand the scope of the 

rule to include a new category of 

worker, the platform worker, to whom 

an issuer would offer and sell securities, 

under certain conditions, without 

registration under the Securities Act. 

Similarly, the Commission is proposing 

amendments to permit an Exchange Act 

reporting issuer to register offers and 

sales to platform workers on Form 

S–8.105 The Commission is proposing 

these amendments on a temporary basis 

for a five-year period. Permitting gig 

economy issuers to utilize the Rule 701 

exemption on a temporary basis would 

allow the Commission to assess the 

appropriateness of the exemption for 

these new work relationships and thus 

should help inform the Commission’s 

ongoing efforts to modernize its rules in 

light of changing economic and market 

conditions. In connection with the 

proposed amendments, issuers that offer 

and sell securities to platform workers 

would be required to furnish certain 

information to the Commission at sixmonth intervals to assist in evaluating 

the proposed expanded scope of Rule 

701 and Form S–8. The Commission 

also is proposing to amend Rule 

12g5–1 under the Exchange Act to 

extend the exclusion from the definition 

of ‘‘held of record’’ and corresponding 

safe harbor, for securities issued to 

platform workers. 

We are mindful of the costs imposed 

by and the benefits obtained from our 

rules and amendments.106 The 

discussion below summarizes 

information about the gig economy in 

general, various attributes of platform 

workers and specific information about 

the online platform economy. We then 

discuss the potential economic effects of 

the proposed amendments. These 

include the likely benefits and costs, 

effects on efficiency, competition, and 

capital formation, and reasonable 

alternatives. We attempt to quantify 

these economic effects whenever 

possible; however, due to data 

limitations, we are not able to quantify 

many of the economic effects. 

A. Economic Baseline 

The baseline for the economic 

analysis consists of the current 

regulatory requirements applicable to 

issuers issuing securities to their 

employees as part of their compensation 

arrangements. Non-reporting issuers are 

able to rely on Rule 701 to offer 

compensatory securities to their 

employees. Registrants are able to 

register the offer and sale of 

compensatory securities to their 

employees on Form S–8. As discussed 

above, these provisions currently are not 

available for platform workers because 

of their non-traditional employment 

status. Thus, the affected parties for the 

proposed amendments would consist of 

online platform-based businesses 

wishing to offer securities as 

compensation, their platform workers, 


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107 Katherine Abraham, John Haltiwanger, Kristin 

Sandusky, and James Spletzer, The Rise of the Gig 

Economy: Fact or Fiction, 109 AEA PAPERS & 

PROCEEDINGS 357 (2019) (the ‘‘2019 Abraham 

Study’’). 

108The Current Population Survey (CPS) is 

conducted on a monthly basis by the United States 

Census Bureau on behalf of the Bureau of Labor and 

Statistics. The CPS may include supplementary 

questions/topics on a non-periodic basis. In 2005 

and again in 2017 the supplementary questions 

focused on contingent workers. See, e.g., U.S. 

Bureau of Labor Statistics, Electronically mediated 

work: New questions in the Contingent Worker 

Supplement, MONTHLY LAB. REV. (Sept. 2018) 

(the ‘‘2017 Contingent Worker Supplement’’), 

https://www.bls.gov/opub/mlr/2018/article/ 

electronically-mediated-work-new-questions-in-thecontingent-worker-supplement.htm. 

109See, e.g., Katherine Abraham, John 

Haltiwagner, Kristin Sandusky, and James Spletzer, 

Measuring the gig economy: Current Knowledge and 

Open Issues (Nat’l Bureau of Econ. Research 

Working Paper 24950, 2018) (the ‘‘2018 Abraham 

Study’’). The 2018 Abraham Study finds that there 

has been a growing discrepancy between the level 

of self-employment as measured in core household 

surveys versus the level of self-employment as 

measured in administrative data. The study 

concludes that examining integrated data sets that 

combine survey, administrative, and private data 

are likely to improve the measurement of selfemployment activity. 

110Lawrence Katz & Alan Krueger, The Rise and 

Nature Of Alternative Work Arrangements in the 

United States, 1995–2015, 72 ILR REV. 382 (2019) 

(the ‘‘Katz Study’’). 

111The definition of alternative work 

arrangements used in the Katz Study includes 

temporary help agency workers, on-call workers, 

contract workers, and independent contractors or 

freelancers. 

112The 2005 results in the Katz Study were based 

on data from the 2005 Contingent Worker 

Supplement and the 2015 results in the Katz Study 

were based on a survey conducted by RANDPrinceton as part of the RAND American Life Panel 

(the ‘‘Rand-Princeton Survey’’). 

113The Katz Study does not discuss 2005 online 

platform participation rates. 

114A non-employer business is defined by the 

Census Bureau as one that has no paid employees, 

has annual business receipts of $1,000 or more ($1 

or more in the construction industries), and is 

subject to federal income taxes. Most nonemployers are self-employed individuals operating 

very small, unincorporated businesses, which may 

or may not be the owner’s principal source of 

income. https://www.census.gov/quickfacts/fact/ 

note/US/NES010217. 

115This sector corresponds to North American 

Industry Classification System (NAICS) code 485. 

116See also Jonathan Hall & Alan Krueger, An 

Analysis of the Labor Market for Uber’s DriverPartners in the United States, 71 ILR Review 705 

(2018) (the ‘‘Hall Study’’). The Hall Study finds that 

the number of Uber drivers increased from a base 

of zero in 2012 to 460,000 active drivers by the end 

of 2015. 

117The 2017 Contingent Worker Supplement 

defines 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. 

118The Federal Reserve has conducted the Survey 

of Household Economics and Decision Making on 

an annual basis starting in 2013. 

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’’). 

120The 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. 

122The 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. 

123Companies 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 

and any companies with which these 

businesses compete in the labor market. 

1. Overview of the Gig Economy 

Numerous recent studies document 

an evolution and expansion of the gig 

economy over time. These studies 

examine various aspects of the nature of 

non-traditional (or alternative) work 

arrangements and corresponding trends 

in this area. The findings across these 

studies may vary for multiple reasons. 

For example, there is no general 

consensus on the definition/scope of the 

gig economy, or its various 

constituents.107 Consequently, the 

results of these studies may vary 

because they use different definitions of 

the gig economy. Moreover, various 

sources of data are utilized to study the 

field. The three main sources of data 

used in these studies are government 

surveys such as the Current Population 

Survey,108 administrative data such as 

IRS filings, and private sector data. Due 

to the differing nature of the data 

analyzed, different types of errors or 

biases in the data may affect the 

findings of these studies.109 We discuss 

some of the main findings of this 

literature below and then focus on data 

and statistics from studies using 

definitions of gig economy that are more 

likely to be relevant to the scope of the 

proposed amendments to Rule 701 and 

Form S–8. 

A 2019 study,110 using a broad 

definition of alternative work 

arrangements,111 finds a significant 

increase in alternative work 

arrangements over the 2005–2015 

period. It estimates that about 15.8 

percent of survey participants engaged 

in some form of alternative work 

arrangement in 2015 as compared to 

10.7 percent in 2005.112 It also finds that 

workers providing services through an 

online intermediary accounted for 0.5 

percent of all workers in 2015.113

The 2019 Abraham Study reports selfemployment rates increasing from 13 

percent in 2004 to 15 percent in 2016, 

based on published Census Bureau 

statistics on non-employer 

businesses.114 The largest increase in 

non-employers between 2010 and 2016 

took place in the Ground Passenger 

Transportation sector,115 which grew by 

almost 300 percent (651,000 drivers) 

during the period.116 The study also 

finds positive growth in non-employers 

for the following sectors: NAICS 488 

(Support Activities for Transportation), 

NAICS 611 (Educational Services), 

NAICS 448 (Clothing and Clothing 

Accessories Stores), and NAICS 446 

(Health and Personal Care Stores), 

although to a much less extent as 

compared to the growth observed in the 

Ground Passenger Transportation sector. 

The 2017 Contingent Worker 

Supplement estimated that there were 

about 1.6 million electronically 

mediated workers in the United 

States,117 accounting for one percent of 

total employment. 

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. 

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 


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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. 

124See 2019 Abraham Study, supra note 107. 

125Although 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. 

126Academic 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). 

127Under certain circumstances, inappropriate 

structures of compensation contracts may lead to 

undesirable outcomes, such as inappropriate risk 

taking. 

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. 

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

B. Broad Economic Considerations 

Below, we discuss broad economic 

considerations derived from the 

academic literature focusing on nonexecutive 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 equitybased 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 nonexecutive employee compensation 

arrangements. Although this stream of 

literature highlights the potential 

incentive alignment effect that equitybased 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, 


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128For 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. 

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. 

130See 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 nonexecutive 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. 

131See Hochberg Study, supra note 130. 

132See 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 nonexecutives 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 broadbased 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. 

particularly for workers with 

specialized skills. 

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 equitybased pay under the proposed 

amendments and will depend on how 

affected issuers structure compensation 

arrangements based on each issuer’s 

facts and circumstances. 

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 nonreporting issuers’ platform workers. 

Further, the relatively more opaque 

information environment of nonreporting issuers is likely to lead to 

increased valuation risk in the equitybased 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

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 nonreporting issuers. We thus expect the 

proposed amendments to provide these 

issuers with increased flexibility in 

terms of available resources. 

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 


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133See id. 

134See 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 EquityLinked 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 optionbased 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. 136Specifically, 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. 137Transfer 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. 

138Although 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. 

139Relatedly, 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. 

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. 

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

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

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. 

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. 


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140We 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 taxqualified plans and therefore are not required to 

adhere to ERISA requirements, which can be costly. 

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. 

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 


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141See 44 U.S.C. 3501 et seq. 

142 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

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 equitybased 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 


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79956 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Proposed Rules 

143See 17 CFR 230.701(e). 

144We 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. 

information disclosed. The titles for the 

affected collections of information are: 

• ‘‘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. 

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

Collection of 

information Proposed amendment Expected estimated PRA effect of proposed amendment 

Current 

number of 

average annual 

responses 

Estimated 

increase in 

number of 

average annual 

respondents 1

Form S–8 .......... • Would temporarily expand the scope of 

Form S–8 to include issuances to a registrant’s platform workers in addition to 

its employees.

• Expected to increase the average annual number of Form S–8s filed during 

the temporary 4-year period.

• 2,140 ............. • 17 

• Issuers would be required to furnish 

certain information every six months.

• Expected to increase PRA burden by 2 

hours per affected respondent annually 

(i.e., 1 hour for each semi-annual response).

• 0 .................... • 17 

Rule 701 ............ • Would temporarily expand the scope of 

Rule 701 to exempt issuances to an 

issuer’s platform workers in addition to 

its employees.

• Expected to increase average annual 

number of issuers required to provide 

Rule 701(e) disclosure because offers 

and sales to 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).

• 800 ................ • 6 

• Issuers would be required to furnish 

certain information every six months.

• Expected to increase PRA burden by 3 

hours per affected respondent annually 

(i.e., 1.5 hours for each semi-annual response) 2.

• 0 .................... • 105 

1These 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. 2We 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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145We request comment pursuant to 44 U.S.C. 

3506(c)(2)(B). 

PRA TABLE 2—STANDARD ESTIMATED BURDEN ALLOCATION FOR SPECIFIED COLLECTIONS OF INFORMATION

Collection of information Internal 

(%) 

Outside 

professionals 

(%) 

Form S–8 .........................................................................................................................................................

Rule 701 .......................................................................................................................................................... 50 

25 

50 

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

Collection of 

information 

Number of 

estimated 

affected 

respondents 

Burden hour 

annual 

increase per 

affected 

respondent 

Increase in 

burden hours 

for affected 

respondents 

Increase in 

internal 

burden hours 

for affected 

respondents 

Increase in 

professional 

hours for 

affected 

respondents 

Increase in 

professional 

costs 

for affected 

respondents 

(A) (B) (C) = (A) × (B) (D) = (C) × 0.5 

or 0.25 

(E) = (C) × 0.5 

or 0.75 

(F) = (E) × 

$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 

1Based 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. 2Based 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

Collection of 

information 

Current burden Program change Requested change in burden 

Current 

annual 

responses 

Current 

burden 

Hours 

Current 

cost 

burden 

Number of 

affected 

responses 

Change 

in issuer 

hours 

Change in 

professional costs 

Requested 

annual 

responses 

Requested 

burden 

hours 1

Cost burden 

(A) (B) (C) (D) (E) (F) (G) (H) = (B) + (E) (I) = (C) + (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. 

2Thus, 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

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, 


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146 5 U.S.C. 601 et seq. 

147 5 U.S.C. 603(a). 148 5 U.S.C. 601(6). 

149Based 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. 

150None of the 17 Forms S–8 filed by issuers with 

service-providing platforms were small entities. 

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

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. 

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. 

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 nonreporting 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 


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151See 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 noncompensatory 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. 

152We 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. 

153We 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. 

154See supra note 150. 

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

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-a`-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. 

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 capitalraising 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. 


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79960 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Proposed Rules 

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

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: 

• 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 

■ 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). 

* * * * * 

■ 2. Amend § 230.428 by adding 

paragraph (d) to read as follows: 

§ 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 

(§ 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). 

■ 3. Amend § 230.701 by adding Note 1 

to paragraph (c) and adding paragraph 

(h) to read as follows: 

§ 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 

§ 230.701(h) for the exemption under 

§ 230.701 applicable to offers and sales of 

securities to platform workers. Platform 

worker is defined in § 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 


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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 capitalraising 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 § 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 

§ 230.701. 

Instruction to § 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 § 200.83 for 

information furnished pursuant to 

paragraph (h)(3) of this section. Written 

requests for confidential treatment 

under § 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 

§ 230.701(h). 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

■ 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. 

* * * * * 

■ 5. Amend § 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: 

§ 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 § 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 

§ 230.701(h), for the temporary period 

set forth in § 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 capitalraising 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 


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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 § 200.83 

for information furnished pursuant to 

this section. Written requests for 

confidential treatment under § 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 

§ 239.16b(c). 

■ 6. Amend Form S–8 (referenced in 

§ 239.16b) by: 

■ a. Redesignating paragraph (b) of 

General Instruction A.1. as paragraph 

(c); 

■ b. Adding paragraph (b) of General 

Instruction A.1.; 

■ c. Revising paragraph 1 of General 

Instruction G. (‘‘Updating’’); 

■ d. Revising the Note immediately 

following the heading ‘‘Part I— 

INFORMATION REQUIRED IN THE 

SECTION 10(a) PROSPECTUS;’’ 

■ e. Revising Item 2 of Part I; and 

■ 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) 

(§ 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 

§ 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 capitalraising 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 § 239.16b(c)]. On 

that date, § 239.16b(c) will expire and 

will no longer be effective. 

Note: The purpose of § 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 § 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 § 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 § 200.83 

for information furnished pursuant to 

§ 239.16b(c)(3). Written requests for 

confidential treatment under § 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 § 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 


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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) (§ 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) (§ 230.428(b)(l)) or Rule 

428(d)(1) (§ 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) (§§ 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 (§ 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) (§§ 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) 

(§ 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 

■ 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. 

* * * * * 

■ 8. Amend § 240.12g5–1 by revising 

paragraph (a)(8) to read as follows: 

§ 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 

§ 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 

§ 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 § 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 § 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 

§ 230.701(h). On that date, § 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 

SOCIAL SECURITY ADMINISTRATION 

20 CFR Part 401 

[Docket No. SSA–2018–0012] 

RIN 0960–AI31 

Anti-Fraud System 

AGENCY: Social Security Administration. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: We separately published, in 

today’s Federal Register, notice of a 

modified system of records entitled 

Anti-Fraud (AF) System. Because this 

system will contain some investigatory 

material compiled for law enforcement 

purposes, this proposed rule will 

exempt those records within this system 

of records from specific provisions of 

the Privacy Act. 

DATES: To ensure that your comments 

are considered, we must receive them 

no later than January 11, 2021. 

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