Archive for category: Investments

[Don’t] Tell Me Lies, Tell Me Sweet Little Lies … or the SEC will charge you with fraud

December 19, 2019/in Corporate Governance in Benefits, Equity Compensation, Executive Compensation, Fiduciary Duties, Investments, Litigation

by John Ludlum

Many private companies assume that if valid federal and state exemptions from registration are available for private company securities that there is little risk of problems with the Securities Exchange Commission (SEC). While it is rare for the SEC to take an interest in private company transactions, many SEC Rules apply to private company securities and transactions.

In one example, Stiefel Labs (Company) maintained an Employee Stock Bonus Plan (Plan) with Company contributions funded, at least in part, by shares of Company stock. As a private company, repurchases by the Company were the only way for employees to receive liquid funds for their shares. The Company engaged independent accountants to perform fiscal year end valuations and made this valuation information available to Plan participants and used this value for repurchases for the next year.

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