What is the Rule 701 disclosure rule?
Separate from the three exemption limits, Rule 701 carries a disclosure obligation once your grants get large. If the total value of your Rule 701 grants exceeds $10M in a rolling 12-month period, you take on an obligation to give recipients financial disclosures before they exercise. This article explains the threshold and what it means for your team.
What the $10M threshold means
The $10M threshold is not one of the three exemption limits, and crossing it does not break your exemption. What changes is that you take on an added obligation: recipients with grants in that 12-month window must receive a financial disclosure package before they exercise, even if an individual grant was small.
When disclosures are due
Recipients must receive the disclosure package before they exercise. The obligation is tied to exercise, so it applies ahead of any exercise happening, not after.
How Cake helps today
Cake tracks your progress toward the $10M threshold in the Disclosure Obligations tab, so you can see when you are getting close.
What Happens Next
As you add grants, Cake updates your position against the $10M threshold so you can see when you are approaching it.
Important: If you approach or cross the $10M threshold, or think you might, speak with your securities counsel about what financial disclosures you need to provide to recipients, and when. Cake does not determine what your disclosure package must contain.
Related Articles
- What is Rule 701? - the exemption and the three limits
- How Cake tracks your $10M disclosure threshold - how the running total is calculated
- How Cake calculates your Rule 701 position