On March 31, 2016, U.S. Securities and Exchange Commission Chair Mary Jo White travelled to Palo Alto to deliver the keynote address at a program co-hosted by the SEC and the Stanford University Rock Center for Corporate Governance.1 Her remarks, and the remarks of other SEC officials with her in Stanford at the time, were seen as a warning that the SEC had begun investigating so-called unicorns (privately held companies with a valuation in excess of $1 billion) and the loftier ends of the venture capital market.2 This was confirmed a few weeks later when Theranos, the now beleaguered blood testing company, disclosed that it was the subject of investigations by both the SEC and the Department of Justice.
Chair White’s speech was not limited to jousting with unicorns, however. She also indicated that the SEC was reviewing capital formation outside of the IPO registration process at all levels, with view to assuring that it takes place in a transparent, safe and efficient way, whether pursuant to Regulation D, the new crowdfunding rules or Regulation A. In addition, Chair White noted the need for effective regulation of secondary markets for private company shares, as well as regulation addressing new “fintech” products, including applications of blockchain technology (like bitcoin), automated asset managers, or roboadvisers, and online marketplace lenders such as LendingClub Corporation. But the main thrust of her remarks was that private companies, particularly larger ones or ones that aspire to become public in the future, need to concern themselves with transparent disclosure, financial controls and overall good corporate governance.
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