The Securities and Exchange Commission on Tuesday announced that San Francisco-based Equidate agreed to settle charges that it violated federal securities laws by failing to register security-based swaps—swaps that were offered and sold online to shareholders in pre-IPO companies.
Equidate’s platform provided liquidity for employees of private, growth-stage tech companies and others holding restricted shares of their stock. Equidate essentially matched those shareholders with people who wanted to invest in the potential economic return on those pre-IPO shares, the SEC said.
To facilitate the transactions, a subsidiary of Equidate entered into contracts with the shareholders and investors, and payment provisions were triggered by such events as a merger, acquisition, or initial public offering of the underlying company. But Equidate never filed a registration statement for the swaps nor sold them through a national securities exchange as required, according to the SEC.
“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 neither admitted nor denied 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.