SEC Files Subpoena Against NetCirq LLC
On November 25, 2015, the SEC filed a subpoena enforcement action against NetCirq, LLC (“NetCirq”). According to the SEC’s application and supporting papers, the SEC is investigating whether NetCirq and others have violated or are violating provisions of the federal securities laws in connection with transactions involving pre-IPO companies, including transactions that may constitute security-based swaps or secondary market trading in possible violation of certain registration requirements. Pursuant to the SEC’s subpoena dating back to May 2015, NetCirq was obliged to produce documents to the SEC, but failed to do so.
The SEC’s application claims that NetCirq purports to be a private equity marketplace that resells private securities and portfolio interests creating a secondary market for private equity. The SEC’s application explains that NetCirq claims that it has conducted a number of transactions of securities involving pre-IPO companies. However, according to the SEC, none of the transactions have been conducted pursuant to a registration statement, nor were they executed on a national securities exchange. NetCirq also is not a registered broker-dealer.
As part of its investigation, the staff in the SEC’s San Francisco Regional Office served NetCirq with an SEC subpoena in May 2015 seeking, among other things, documents relating to NetCirq’s activities creating a purported private equity marketplace and NetCirq’s transactions involving securities of unregistered issuers. According to the SEC, although NetCirq admitted that it maintained relevant documents, NetCirq has failed to produce any documents in response to the subpoena. NetCirq also has failed to respond to the SEC staff’s repeated efforts to secure NetCirq’s compliance with the subpoena.
The SEC seeks an order from the federal district court compelling NetCirq to comply with the SEC’s administrative subpoena and to produce all responsive materials to the staff. The SEC is continuing its fact-finding investigation and, to date, has not concluded that anyone has violated the federal securities laws.
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