Senators Pat Toomey (R., PA) and Mark Warner (D., VA) have introduced Senate Bill 576, the ‘‘Encouraging Employee Ownership Act.’’  The bill would require the SEC, within 60 days after enactment, to raise the threshold in Section (e) of Rule 701(e), the exemption from registration for privately held companies for offers and sales of compensatory securities to employees. Currently, Rule 701(e) requires that, if the aggregate sales price or amount of securities sold during any 12-month period exceeds $5 million, the company must deliver  additional disclosure to the employees, including financial statements and other potentially confidential information. The bill would raise the disclosure threshold from $5 million to $10 million, and index it for inflation every five years to reflect changes in the CPI.

Warner’s press release explains that “companies that wish to issue more than $5 million in stock to employees must comply with sensitive reporting and disclosure requirements. For new and fast-growing companies, stock compensation is a valuable tool, but many privately-held companies are reluctant to issue their workers more than the $5 million in stock that would trigger mandatory reporting of potentially sensitive information.”

According to the WSJ, the “bill’s path through Senate is unclear. There’s no stand-alone companion legislation in the House, but the same changes were included as part of a broad package of financial services bills the House passed in January by a vote of 271-154. The broader House bill included a controversial delay to a provision requiring that banks sell stakes in certain complex securities, a provision many congressional Democrats and the White House oppose.”