Equidate Settles with SEC for $80,000 for Selling Pre-IPO Shares

expired-penalty-fine-times-upEquidate has settled with the SEC for selling unregistered swaps involving pre-IPO companies. The San Francisco-based Fintech firm agreed to settle the charges it had violated federal securities laws by failing to register security-based swaps that were sold online to shareholders in pre-IPO companies. Equidate stopped offering security-based swaps in December 2015 as a result of the investigation.

The SEC said 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.  Equidate never filed a registration statement for the swaps nor sold them through a national securities exchange and thus found themselves facing the scrutiny of the SEC.

Jina Choi, Director of the SEC’s San Francisco Regional Office, commented on the settlement;

“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.”

Equidate consented to the SEC’s order without admitting or denying the findings and agreed to pay an $80,000 penalty.  The settlement was similar to another SEC action that saw Sand Hill Exchange pay a penalty for selling pre-IPO based swaps.

 

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