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SEC Ramps Up Regulation of Pre IPO Securities Market

July 10, 2015

Mike Dicke, co-chair of Fenwick & West's securities enforcement group, was quoted in The Recorder in an article on the SEC’s increasing regulation of the growing pre-IPO securities market.

The possibility of unethical action in the pre-IPO securities market presents potential dangers for investors, as well as stockholders within a company. 

Dicke told The Recorder that he expects the SEC to continue to watch the private sector closely for concerns attempting to sell illiquid private stock to investors. He predicted that the SEC will conduct many more investigations related to these issues.

“I think the SEC Enforcement Division is looking to get the word out more broadly […] that the market for pre-IPO securities carries very real risks that the average investor needs to understand before participating,” said Dicke, who up until last year was the head of enforcement in the SEC’s San Francisco office.

Despite the risks, pre-IPO stocks are growing in appeal, because companies now stay private longer and therefore have more time to gain funding and increase in value. More than 80 venture-backed startups are currently valued at more than $1 billion, The Recorder noted, citing Fortune Magazine.

Everybody wants to be in on the ground floor of something that's going to be worth a lot of money in the future," Dicke said.

The full article is available through The Recorder’s website (subscription required).