[This story previously appeared in Securities Regulation Daily.]
By Amanda Maine, J.D.
A firm operating as an offshore crowdfunding platform agreed to pay a $25,000 civil monetary penalty to settle SEC charges. The SEC alleged that the firm failed to implement measures reasonably designed to prevent U.S. investors from using its website to invest in securities and failed to verify that the investors in the unregistered securities were accredited investors (In re Eureeca Capital SPC, November 10, 2014).
Eureeca’s crowdfunding platform. Eureeca Capital SPC, which is incorporated in the Cayman Islands, operates an online, securities-based crowdfunding platform. Its website hosts offerings of securities from non-U.S. companies. Visitors to the website could obtain information about these offerings without registering with the website, which constituted a general solicitation. Users could also register on the website to gain additional information and to invest in the offerings. Users who registered were required to provide some basic information about themselves. However, no representation regarding accredited investor status was requested.
Accredited investor status. In addition to not implementing procedures reasonably designed to prevent U.S. investors from using its services, the SEC alleged, Eureeca did not take reasonable steps to verify that the U.S. investors were accredited investors. The firm allowed two of the U.S. investors to self-certify their accredited investor status without explaining what the term met or taking further action to determine whether they were, in fact, accredited investors. Eureeca did not request any verifying information from the third U.S. investor prior to allowing him to invest in the offerings on Eureeca’s website. The three investors invested approximately $20,000 in four separate offerings for securities through the website.
Charges and settlement. In an order instituting administrative proceedings, the SEC charged Eureeca with violating Securities Act Secs. 5(a) and 5(c) for selling unregistered securities that were not eligible for exemption from registration. The SEC also charged the firm with violating Exchange Act Sec. 15(a) for effecting the purchase or sale of a security without being a registered broker-dealer or associated with a registered broker-dealer.
Eureeca settled the matter with the SEC, agreeing to a cease-and-desist order and to be censured. Eureeca also agreed to pay a civil penalty of $25,000. The SEC acknowledged that remedial acts taken promptly by Eureeca were considered in its determination to accept Eureeca’s offer of settlement. Eureeca neither admitted nor denied the SEC’s charges.
The SEC’s order is Release No. 33-9678.