Facebook Gets Pass from SEC

October 21, 2008

Fenwick & West was highlighted in the recent Red Herring article, "Facebook Gets Pass from SEC," outlining the Firm's representation of Facebook in dealings with the Securities and Exchange Commission.

Facebook recently received a "no-action letter" from the SEC, allowing them to issue unregistered restricted stock grants to employees, directors and consultants. Representing Facebook, Fenwick & West attorneys pushed for an exemption from the provisions of the Securities Exchange Act of 1934, which requires formal registration of many securities to provide information to prospective investors. This would have forced Facebook, a private company, to unveil information about its efforts to generate revenue.

Fenwick argued that the agency should not require registration since restricted stock holders do not pay for them and should not be considered investors, restricted stock cannot be traded, and Facebook is a private company. If Facebook should stage an IPO, Fenwick lawyers said, the company would register shares of common stock that owners of restricted shares received.

Anne Krauskopf, Senior Special Counsel for the SEC, stated the exemption would remain in effect until Facebook stages an IPO or a "change of control" event such as a merger or acquisition.