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SEC Focuses on Employee Access to Private Tech Financials

February 21, 2017

The Information quoted Fenwick’s securities enforcement co-chair Michael Dicke and Fenwick partner Sam Angus in an article about the U.S. Securities and Exchange Commission’s recent investigations of private tech companies and whether they are following an SEC rule giving employees participating in certain company stock plans access to detailed financial information. The SEC has particularly been interested in “unicorns”—private companies with valuations exceeding $1 billion.

At issue is an SEC rule that requires companies that issue more than $5 million in stock awards in a twelve month period to provide financial statements to the employees covering at least two years. Dicke told The Information that he thought private companies were generally complying with the rule. But he expected regulators to bring enforcement actions if they found serious and clear violations, despite pending change in SEC leadership under the Trump administration.

“If the facts are compelling and there’s a violation, I would expect cases to be brought,” Dicke said. “It’s doesn’t matter [who’s in charge].”

Angus told The Information that the SEC has also sent letters in the last two years to private tech companies to determine whether they were properly disclosing their fundraisings in filings. That effort does not appear to have resulted in much further enforcement, Angus said.

The full article is available through The Information website (subscription required). The story was also picked up by the Silicon Valley Business Journal.