Facebook is in some big trouble with the SEC over their IPO. Check the jump to see their possible fines.
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The Securities and Exchange Commission (SEC) filed charges against online trading platforms and private funds that were selling private shares in Facebook.
The SEC charged SharesPost and its CEO Greg Brogger with failing to register as a broker before offering securities. SharePost settled with the SEC, paying $80,000 in penalties.
Additionally, the SEC is charging two private funds and their managers with misleading investors in their offerings of Facebook stock.
The SEC alleges that Frank Mazzola and his firms Felix Investments and Facie Libre Management Associates engaged in self-dealing and secret commissions. The SEC says that Mazzola and Facie Libre sold interests in Facebook, despite owning certain Facebook shares. Mazzola is also charged with misrepresenting Twitter’s revenue.
In a separate lawsuit, the SEC charged Laurence Albukerk and EB Financial Group with not properly disclosing how additional fees were collected as part of private stock offerings. Albukerk and EB Financial settled without admitting charges and agreed to pay fines and return illegal profits.
In Dec. 2010, the SEC started its probe into the way secondary markets such as SharesPost offer stock in private tech companies. The SEC’s investigation picked up steam in Feb. 2011, amidst increased activities.
At the time, the two biggest targets were SecondMarket and SharesPost. SecondMarket was already regulated by the SEC as a broker-dealer at the time of the probe. At the end of 2011, SharesPost also registered as a broker-dealer.
Last April, the SEC proposed rule changes to the way the law treats shares of private companies. These rules were created in part because of the various loopholes private companies have attempted to use to keep from reaching the 499 shareholder threshold that forces a company to go public. The U.S. Senate is also voting on ways to make it easier for companies to raise capital before filing for an IPO.
