Private company share trader SharesPost and its chief executive, Greg Brogger, have agreed to pay penalties, of $80,000 and $20,000 respectively, to settle charges that the firm facilitated securities transactions without registering with the SEC as a broker-dealer.
Further, after the completion of the SEC’s investigation, SharesPost acquired a broker-dealer and its membership was approved by the Financial Industry Regulatory Authority,
The charges stem from the SEC’s yearlong investigation of the fast-growing business of trading pre-Initial Public Offering (IPO) shares on the secondary market. The company has, for instance, moved shares in
“The newly emerging secondary marketplace for pre-IPO stock presents risk for even savvy investors,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office, in a statement. “Broker-dealer registration helps ensure those who effect securities transactions can be relied upon to understand and faithfully execute their obligations to customers and the markets. SharesPost skirted these important provisions.”
SharesPost is an online service that matches buyers and sellers of pre-IPO stock, connecting venture-backed private companies and their shareholders with the rest of the investment community. It also provides information, tools and other assistance to promote these transactions.
According to the SEC
In a statement issued to Securities Technology Monitor, SharePost confirmed the settlement, but added that the company “neither confirms nor denies the SEC’s finding of fact or legal conclusions.”
In the state, SharesPost says its SharesPost’s discussions with the SEC “began in December of 2010 during an industry-wide inquiry into private capital markets.”
Moreover, the statement said that, since being founded in 2009, SharesPost’s business model evolved to become more actively involved in helping its customers with their private market transactions.
“To accommodate these changes, SharesPost integrated third party broker dealers and their representatives into its platform. All transactions initiated on the platform during this period were facilitated by a registered representatives of broker-dealers in good standing,” says the statement.
Finally, SharesPost said in the statement that, of the more than 1,500 transactions completed to date, there has yet to be a single customer complaint to either the Financial Industry Regulatoryu Authority, which supervises brokers, or the SEC.
“Other than the technical legal issue regarding the applicability of Section 15(a) of the Securities Exchange Act to SharesPost's business model (i.e., whether or not SharesPosts' integratiion of a third party broker was sufficient), the SEC did not find it necessary to initiate any other claims against SharesPost,” the company stated.
Tommy Fernandez writes for
