At a recent panel organized by San Francisco’s Federal Bar Association, the San Francisco Regional Director of the Securities and Exchange Commission (SEC), Jina Choi, confirmed that the agency continues to focus on investor fraud in the pre-IPO private market space. Highlighting enforcement actions against the non-public Zenefits, Credit Karma, and Theranos[1]

Last week the SEC announced it had reached an agreement with privately-held company Zenefits, and its co-founder and former CEO Parker Conrad, to settle allegations that Zenefits materially misled Series B and C investors. The parties agreed to settle for over a combined $980,000 (Zenefits agreed to pay $450,000, with Conrad responsible for the balance). This appears to be a first-of-its-kind SEC enforcement action against a privately-held company, reflecting this ongoing enforcement priority for the agency in Silicon Valley. 
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Department of Justice sign

Earlier this year we highlighted the growing trend of regulators asserting continuing post-investigation control over the operations of companies accused of compliance failures. At the state level, we highlighted a deal reached between the California Department of Industrial Relations (DIR) and Zenefits, a privately-held health care brokerage firm, in which the DIR agreed to forgive half of a $7 million fine in exchange for continuing audits to evaluate future compliance with state regulations.

At the federal level, we’re seeing the same trend.
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Blog-Image---TechnologyAfter a series of compliance failures leading to the resignation of company’s CEO, the privately-held health care brokerage company Zenefits was just hit with a $7 million dollar settlement by the California Department of Insurance (DIR). The terms of the settlement may reflect a new trend in compliance enforcement, namely that regulators are trading monetary penalties for oversight over privately-held companies.
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The brightest minds in Silicon Valley work 24/7 to disrupt existing systems and industries. No one can argue that Uber and Lyft haven’t fundamentally altered transportation, that AirBnB hasn’t changed the way we travel, or that Netflix hasn’t rendered brick and mortar video rental stores obsolete. Can those same minds harness the innovative energy of the region to make it easier for regulated industries to comply with state and federal laws? At least one Silicon Valley company thinks so, and is exploring new ways to marry its technological expertise with its compliance obligations.
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Every day corporate entities and individuals in some parts of the world provide payments to foreign officials in exchange for business favors. While it may be a common feature of business in these places, this kind of activity is illegal under the Foreign Corrupt Practices Act (FCPA), which criminalizes various acts of bribery and related accounting fraud. The consequences for failing to comply with the FCPA are severe, and ensuring compliance can be especially difficult for start-up or relatively young companies growing rapidly and expanding into foreign markets before they can institute robust compliance systems.
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