The following is an update to the Division of Corporation Finance's Current Issues and Rulemaking Projects Outline dated November 14, 2000. When the Outline as a whole is revised, this update will be incorporated into it. Registration Relief Involving Employee Stock Option Plans Companies have granted stock options to broad based groups of employees under stock option plans in anticipation of going public within a short time after the stock option grants. These stock options are granted under stock option plans established for compensatory purposes. Many companies are now finding that they have granted stock options to 500 or more employees and their plans to go public have been delayed.
Stock options are a separate equity security under the Exchange Act.
Beginning in 1991, the Commission by order, and subsequently the staff by no action letter, exempted or relieved issuers with 500 or more stock option holders from having to register their stock options under the Exchange Act when specified conditions were present. As in the past, any relief granted by the staff would apply only to the stock options. The modified conditions would need to be present only when the company is relying on the relief. Former employees may retain their vested options. As with the current conditions, the options must remain non-transferable in most cases.