SEC Settles Charges With Firm Over Unregistered Swaps in Pre-IPO Companies

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Published: December 6, 2016 3:31 pm

Last Updated: January 12, 2020 5:03 pm

The U.S. Securities and Exchange Commission (SEC) recently announced that a San Francisco-based firm has agreed to settle charges that it violated federal securities laws by failing to register security-based swaps that were offered and sold online to shareholders in pre-IPO companies.

The agency instituted an order finding that Equidate sought to provide liquidity for employees of private, growth-stage companies in the Silicon Valley and others holding restricted shares of their stock, and its platform essentially matched these shareholders with investors seeking to invest in the potential economic return on those shares.

Equidate conducted transactions through contracts that its subsidiary entered into with the shareholders and investors, and payment provisions were triggered by such events as a merger, acquisition, or IPO at the underlying company. However the company never filed a registration statement for the swaps nor sold them through a national securities exchange as required.

Jina Choi, Director of the SEC’s San Francisco Regional Office, commented:

Market participants are free to capitalize on the growth of private technology companies in the Silicon Valley or elsewhere, but laws must be followed to ensure security-based swaps are registered and sold through platforms where investors have full disclosure and protections.

The company consented to the SEC’s order without admitting or denying the findings and agreed to pay an $80,000 penalty. Equidate stopped offering and selling security-based swaps in December 2015 as a result of the SEC investigation.