SEC staff issues new CFIs, opens Form S-8 to former target employees and pre-IPO grants

On October 15, 2026, the staff of the Securities and Exchange Commission’s (SEC) Division of Corporation Finance issued six new and two revised Corporation Finance Interpretations (CFIs, formerly known as Compliance and Disclosure Interpretations). The CFIs are largely focused on registration of compensatory and benefit plan equity, with one of the CFIs addressing the timing requirement for filing under Section 16. 

Background

Under the federal securities laws, securities may be issued only in transactions registered with the SEC under the Securities Act of 1933 or in transactions that are exempt from such registration. Securities awarded to employees in the form of equity compensation or issued under employee benefit plans are no exception. Companies that report under the Securities Exchange Act of 1934 and satisfy certain other conditions may use Form S-8—a short-form, automatically effective registration statement—to register the issuance of compensation-related securities. These may include shares associated with options, restricted stock, and restricted stock units (RSUs). Securities registered on Form S-8 are unrestricted and may be freely traded under the federal securities laws by persons who are not affiliates of the issuer. For companies that are not reporting under the Exchange Act, Rule 701 under the Securities Act provides an exemption from registration for the issuance of compensation-related securities, subject to various conditions. Securities issued in reliance on Rule 701 are deemed to be restricted securities and may only be resold in registered transactions or transactions that are exempt from registration, most often under Rule 144.

The new CFIs address these issues:

• The availability of Form S-8 and Rule 701 for compensatory equity awards held by former employees of an acquired company (the target) after the awards are assumed by the acquiror.
• The ability of issuers to file a Form S-8 registering restricted stock and shares underlying RSUs at any time prior to vesting.
• The availability of Form S-8 for registration of shares issuable or vesting following an initial public offering (IPO) pursuant to compensatory awards made prior to the IPO.
• The application of filing fees to future issuances for equity awards that were registered on Form S-8 and subsequently forfeited.
• Calculation of filing fees for defined contribution plans and 401(k) plans where employee accounts are or may be invested in issuer stock.

There is also a new CFI addressing the time to file Form 4 under Section 16 of the Exchange Act for transactions occurring in time zones other than Eastern time. 

Awards held by former target employees

It is common for the acquiror in a corporate transaction to assume equity compensation awards of the target, which will then be settled in acquiror stock. However, General Instruction A.1(a)(3) to Form S-8, read literally, only permits the use of Form S-8 for employees of the registering issuer, as well as former employees who hold equity awards granted while the individuals were employees, which would exclude former employees of the target who still hold awards. Similarly, Rule 701, read literally, only provides an exemption from registration for issuances to employees or former employees of the issuer. The staff previously interpreted these rules to preclude the use of Form S-8 or Rule 701 for former employees of a target entity whose awards were assumed in an acquisition. As a consequence, the acquiror either had to register the issuance of the shares under the assumed award, which was likely impracticable, or cash out the award holder.

Revised CFI 126.14 reverses the position taken by the staff in 2009 and permits an acquiror to use Form S-8 to register shares underlying options, restricted stock, and RSUs it assumes in an acquisition and that are held by former employees of the target. 

In tandem with revising CFI 126.14, the staff issued new CFI 271.29 addressing Rule 701. The new CFI similarly allows a non-reporting acquiror to rely on Rule 701 for the exempt issuance of options, restricted stock, and RSUs pursuant to awards made to former employees of the target that are assumed by the acquiror.

Revised CFI 126.14 and new CFI 271.29 will have consequences for transaction agreements in stock-for-stock acquisitions. These agreements should no longer need to provide for cashing out options and other awards held by former target employees, if the awards are assumed in the transaction.

Restricted stock and RSUs

Prior staff guidance (CFI 126.02) permitted the registration of options at any time prior to exercise. However, this exception did not extend to restricted stock and RSUs.

New CFI 126.47 permits a reporting company to register on Form S-8 the shares underlying restricted stock or RSUs at any time up to the vesting date, rather than by the grant date, provided the company is eligible to use Form S-8 on the vesting date. This brings restricted stock and RSUs into line with the treatment of options under Question 126.02. Depending on the terms of the award, shares underlying RSUs may issue either on the vesting date or on a later settlement date. Even if the shares settle at a later date, Form S-8 must be filed under the staff’s interpretation no later than the vesting date.

As a result of the new CFI, a company will be able to defer the SEC filing fee until vesting and avoid registering shares for awards forfeited before they vest. Acceleration provisions can move forward the vesting date and with it the registration deadline, so that issuers relying on the new interpretation will need to be mindful of the changed deadline in such a case. Also, an issuer might be Form S 8 eligible at the time of grant but not at the time of vesting, in which case the ability to register the grants on Form S-8 will have been lost.

Registering pre-IPO awards

New CFI 271.28 addresses a reporting company that had granted options, restricted stock, or RSUs to employees in reliance on a registration exemption before it went public. Under this new CFI, the company may register on Form S-8 following its IPO the shares issuable upon the vesting of restricted stock and shares underlying outstanding options and RSUs awarded prior to the IPO. Shares that vested prior to the IPO are not covered. Also, the CFI does not address, and provides no remedy for, any defect that may have occurred in the application of a registration exemption to the original grants.

As noted above, under existing CFI 126.02, an issuer can register options on Form S-8 at any time prior to exercise, so that the new CFI is not consequential for option grants. The new CFI does matter for awards of restricted stock and RSUs, however, because absent the new interpretation—or new CFI 126.47 discussed above, which achieves the same result—the registration on Form S-8 might have been considered the impermissible conversion of a private offering into a public offering. If Form S-8 were unavailable for the pre-IPO restricted stock and RSU awards, the recipients would have to rely on Rule 144 for resale, with its attendant conditions and limitations.

Application of filing fees for forfeited equity awards

Under new CFI 126.46, a company that already paid the Form S-8 filing fee for RSUs or other awards with vesting conditions that are later forfeited can apply the allocable portion of the fee to future Form S-8 registrations, including registration of shares returning to the plan’s share reserve.

Companies will need to maintain records tying forfeited awards to specific shares and fees. They also must determine whether a later reissuance requires the filing of a new Form S-8 registration statement.

Until further guidance to the contrary is received from the staff, issuers should assume that, for purposes of counting shares on Form S-8, the forfeited awards are not added back to the number of registered shares.

Filing fees for defined contribution plans and 401(k) plans offering employer stock

401(k) plans and other defined contribution plans in which employee accounts may be invested in issuer stock present complications since it is difficult to determine in advance the number of shares that will be needed. Historical practice with respect to allocations to the issuer stock investment alternative may provide insight to assist with estimating the future dollar value that will be invested in issuer stock, but the number of shares could vary significantly based on the future share value. The solution is to register a dollar amount rather than a number of shares. 

New CFI 240.19 confirms that a company can use Rule 457(o) to calculate the registration fee. Under Rule 457(o), the issuer registers a maximum dollar value of shares (which is applied to shares based on share value at issuance) and pays the filing fee based on that amount rather than registering a specific number of shares. 

On a related topic, revised CFI 126.19 clarifies the fee mechanics for a 401(k) plan offering employer stock as an investment option. Under the plan described in the CFI, there is (i) an automatic company contribution, (ii) an elective employee contribution, and (iii) a matching employer contribution. No fee is owed on the automatic company contributions. A fee is payable on the amount of the employee contributions and the matching employer contributions that are allocated to the purchase of issuer stock under the plan. Interests in the plan would have to be registered, but no separate fee is required with respect to the plan interests. 

Timing of Section 16 reporting

The last of the new CFIs, 135.05 (Section 16), addresses a cross-border timing question under Section 16 of the Exchange Act. Section 16 requires, among other things, directors, officers, and 10% shareholders of a company with a class of stock registered under the Exchange Act to report transactions in the company’s equity securities on Form 4, which must generally be filed no later than 10pm Eastern time on the second business day following the date of the reported transaction. 

The CFI states that the transaction date is the local date where the trade occurred, not the U.S. date Eastern time, even though the filing deadline itself is measured in Eastern time. The date of a transaction local time may differ from the date Eastern time—for example, with transactions occurring in the Far East. In the staff’s example, a trade executed at 9am local time on August 25 (still August 24 in U.S. Eastern time) makes Form 4 due by 10pm Eastern time on August 27.

With 24-hour trading, it is possible for a trade to occur on a date local time that is prior to the date Eastern time. For example, a trade could occur at 10pm local time in Hawaii on August 24, which is 4am Eastern time on August 25. Under the staff interpretation, Form 4 would be due by 10pm Eastern time on August 26, although it is unclear if this is what the staff intended.