SEC exempts Facebook from revealing finances for now
The Securities and Exchange Commission is exempting Facebook from having to make its finances public even though it may soon have more than 500 employees with restricted stock.
Even as it continues to grow, Facebook is facing less pressure to reveal its finances.
The Securities and Exchange Commission in October granted the social-networking site an exemption to part of the SEC Act of 1934, which requires companies to disclose financial information once they have more than 500 stockholders and $10 million in assets.
As BusinessWeek reported, lawyers for Facebook sent the SEC a letter on October 13, asking for an exemption for its distribution of restricted stock. The letter noted that the company could in the future have more than 500 employees with restricted stock. The company currently has more than 700 employees.
While the company did not ask for an exemption for its other forms of equity--stock options or stock purchase rights--it argued that restricted stock units merit exemption because they cannot be traded and are not subject to any active investor interest. The SEC agreed to Facebook's request for an exemption until the company goes public or there is a change of control over the company.
Restricted stock has become a more common form of compensation since it has certain tax advantages over stock options.