Securities regulators have launched a broad investigation into whether hedge funds and other investors are improperly selling hot private technology stocks amid a boom in the trading of such shares, the Wall Street Journal reported today. The investigation, by the Securities and Exchange Commission, is focused on a burst of new activity recently by people selling pre-IPO shares as valuations of private tech companies have exploded and companies have opted to remain private for longer. The SEC also is examining a recent increase in firms selling employee-owned shares of private companies through derivative transactions. In some cases, the sale of employee shares through such derivative transactions is prohibited by the companies. The SEC is looking into whether such derivative transactions represent possible violations of the Dodd-Frank Act of 2010, which makes it unlawful for most individual investors to trade swaps unless the transaction takes place on a national securities exchange with a registration statement from the SEC.
