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🇺🇸 US · US tax

Rule 701

Also called: Rule 701, SEC Rule 701

In one line

A US exemption that lets private companies grant equity compensation to employees without registering those securities.

In plain English

Rule 701 is why your company can hand out options and RSUs privately. It also sets disclosure requirements once grants exceed certain thresholds.

If you were explaining it to a 5-year-old

A rule that lets the club give toys to its helpers without having to open a big public shop first.

Why it matters when you sell

Rule 701 governs the shares you were granted; the resulting stock is still restricted until an exemption lets you resell it.

Related terms

Regulation DRestricted securitiesUnregistered sharesStock option

Put it to use

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Sources

Primary references for this term: US SEC / Investor.gov, IRS (US tax). Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.