Current 401(k) plans often allow participants to purchase and sell securities, including issuer securities, on the open market through “brokerage windows”. On Sept. 22, 2016, the SEC issued a CDI stating that the registration of these issuer securities will depend on the degree and type of participation of the issuer and its affiliates in the program. In the CDI, the SEC applied the same analysis used in Release 33-4790, which relates to the registration of open market employee stock purchase plans.

The new CDI provides that issuers will not be required to register issuer securities purchased or sold by plan participants with employee contributions in a self-directed “brokerage window” if the issuer and the 401(k) plan:

  • do no more than:
    • describe the self-directed “brokerage window” as part of the investment alternatives under the 401(k) plan,
    • make payroll deductions,
    • pay administrative expenses not in any way tied to particular investments selected by employees, and
  • take no action to draw employees’ attention to the possibility of investing in employer securities through the “brokerage window.”