Adoption of Amendments to Rule 701
                           Fact Sheet
                             2/19/99


     In 1988, the Commission adopted Rule 701 under the
Securities Act of 1933 to allow private companies to sell
securities to their employees without the need to file a
registration statement, as public companies do.1   The rule
provides an exemption from the registration requirements of the
Securities Act for offers and sales of securities under certain
compensatory benefit plans or written agreements relating to
compensation.  The exemptive scope covers securities offered or
sold under a plan or agreement betweenestablished a non-reporting
("private") company (or its parents or majority-owned
subsidiaries) and tothe company's employees, officers, directors,
partners, trustees, consultants and advisors.  The maximum extent
of the Commission's exemptive authority under Section 3(b) of the
Securities Act was used to exempt offers and sales of up to $5
million per year.

     Currently, Rule 701 provides that the amount of securities
subject to outstanding offers in reliance on Rule 701, plus the
amount of securities offered or sold under the rule in the
preceding 12 months, may not exceed the greatestr of $500,000, or
an amount determined under one of two different formulas.  One
formula limits the amount to 15% of the issuer's total assets
measured at the end of the issuer's last fiscal year.  The other
formula restricts the amount to no more than 15% of the
outstanding securities of the class being offered.  Regardless of
the formula elected, RRule 701 restricts the aggregate offering
price of securities subject to outstanding offers and the amount
sold in the preceding 12 months to no more than $5 million.

     In October 1996, Congress enacted the National Securities
Markets Improvement Act of 1996 which, for the first time, gave
the authority to provide exemptive relief in excess of $5 million
for transactions such as these. In February 1998, the Commission
proposed a number of revisions to increase the flexibility and
usefulness of Rule 701, as well as to simplify and clarify the
rule.

     Today, the Commission will consider revisions to the rule
that:

          (1)  remove the $5 million aggregate offering price
          ceiling and, instead, set the maximum amount of
          securities that may be sold in a year at the greatest
          of:

          --$1 million (rather than the current
          $500,000);

          --15% of the issuer's total assets; or

          --15% of the outstanding securities of that
          class;

          --$10 million, if the issuer is a foreign private issuer;

          (2)  require the issuer to provide specific disclosure
          to each purchaser of securities if more than $5 million
          worth of securities are to be sold;

          (3)  do not count offers for purposes of calculating
          the available exempted amounts;

          (4)  harmonize the definition of scopeconsultants and
          advisors permitted to use the exemption to the narrower
          definition of Form S-8;

          (5)  amend Rule 701 to codify current and more flexible
          interpretations; and

          (6)  simplify the rule by recasting it in plain English.

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