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Glossary Rule 701

Rule 701 is the federal securities exemption startups typically rely on to issue compensatory equity to service providers, like employees, advisors, and contractors. Startups that rely on Rule 701 are still required to comply with the securities laws and regulations of the state where the service provider receiving equity is based. Although some states have securities law exemptions that mirror Rule 701, other states (like California and New York) have different requirements.