Firm Settles Charges for Selling Unregistered Swaps Involving Pre-IPO Companies

The Securities and Exchange Commission today announced that a San Francisco-based firm 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 SEC instituted an order finding that Equidate Inc. 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.  But Equidate never filed a registration statement for the swaps nor sold them through a national securities exchange as required.

“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,” said Jina Choi, Director of the SEC’s San Francisco Regional Office. 

Equidate 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.

The SEC’s investigation was conducted by Ruth Hawley and supervised by Jeremy Pendrey of the San Francisco office with assistance from Carlos Vasquez and R. Scott Walker.  Also assisting the investigation were Carol McGee and Andrew Bernstein of the Division of Trading and Markets and Amy Starr and Andrew Schoeffler of the Division of Corporation Finance.