Facebook Pre-IPO Share Sales Draw SEC Scrutiny

Managers of private investment funds established solely to acquire the shares of Facebook and other Silicon Valley firms were charged by the Securities and Exchange Commission with misleading investors and pocketing undisclosed fees and commissions. The SEC alleges that the fund managers collectively raised more than $70 million from investors.

Separately, the SEC charged SharesPost, an online service that matches buyers and sellers of pre-IPO stock, with engaging in securities transactions without registering as a broker-dealer.

The charges stem from the SEC’s yearlong investigation of the fast-growing business of trading pre-IPO shares on the secondary market.

“While we applaud innovation in the capital markets, new platforms and products must obey the rules and ensure the basic fairness and disclosure that are the hallmarks of sound financial regulation,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

“Fund managers must fully disclose their compensation and material conflicts of interest.  Investors deserve better than the kind of undisclosed self-dealing present in these cases,” said Robert Kaplan, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has been the victim of securities fraud. Mr. Kahn is an experienced securities fraud and litigation attorney. He is also a FINRA arbitrator in securities disputes among individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.