Nearly two years ago, I began writing about some of the issues related to secondary trading in private company shares. 

Yesterday (Prid. Id. Mart.), the Securities and Exchange Commission announced that it had taken action against several firms and individuals related to activities involving secondary trading of private company shares.  In this Litigation Release, the SEC announced its filing of a civil suit alleging that the defendants had created pooled investment vehicles to invest in pre-IPO companies like Facebook, Inc., Twitter, Inc., and Zynga Inc.  According to the SEC, the defendants misled investors about the compensation they earned, engaged in undisclosed self-dealing adverse to the funds and the funds' investors, lied about the amount of stock the funds actually held, and "freely misstated" material facts about the companies in which the funds were investing to attract potential investors. 

The SEC also announced that it had separately initiated and settled two administrative actions.  In the first action, the SEC alleged that the defendant and his company failed to disclose in their offering materials certain compensation they earned in connection with two Facebook funds they managed.  The second action was filed against SharesPost, Inc., an online platform that facilitated certain secondary market transactions, and its CEO, Greg Brogger, for effecting securities transactions without registering as a broker-dealer.

For more on some of the issues involving secondary trading in privately held companies see my piece in the Daily Journal, "Trading in Private Shares: El Dorado or Fools Gold?", and the following posts:

• The Disappearing Line Between Public and Private Companies
• Secondary Trading In Private Company Shares