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.  Continue Reading With Zenefits Settlement Award SEC Demonstrates Continued Commitment to “Unicorn” Scrutiny Despite Administration Change: Same Old Sheriff in Town

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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. Continue Reading If You Give a Mouse a Cookie: Ongoing Regulatory Monitoring Increasing in Federal and State Non-Compliance Resolution

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. Continue Reading Steep Fines for Company With Compliance Problems, but Recognition of Remediation Efforts May Provide Model Going Forward

The announcement that San Francisco private company Hampton Creek faces an SEC inquiry related to their alleged “buyback” program of vegan mayo comes as no shock. See reporting on Bloomberg. As soon as the facts were initially reported it seemed only a matter of time until the regulators, who have been looking for a poster child (or rather, a whole class of poster children) of private company enforcement in the Bay Area, swooped in. Continue Reading Developments in SEC Private Company Enforcement: Sophisticated VC’s in the Role of Victim

We noted with interest the latest moves by some Bay Area tech giants to permit their employees to sell restricted stock to help them realize the stock value as part of their compensation: See New York Times reporting here. It should come as no surprise that private company employees in our tech economy rely on their potential restricted stock value as an important part of their compensation package, and also their decision whether to work for, or stay working for, one of the “hot” pre-IPO companies (which are legion in Northern California). What may surprise private companies is that this kind of restricted stock sale by employees creates a very easy “in” for the SEC to bring a case should any hidden compliance failures or fraud later be revealed. Continue Reading Private Company Employee Stock Sales Highlight Hidden Dangers of Compliance Failures

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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. Continue Reading Private Company Enforcement: Bay Area Tech Company Designs Tech Solution to Its Compliance Problems