A San Francisco investment fund manager who dealt in not-yet-public Facebook stock has agreed to pay a large fine as part of a Securities and Exchange Commission inquiry into malfeasance in the booming pre-IPO secondary market.
Larry Albukerk, who founded the locally based EB Exchange Fund in 1999, is accused by the agency of misleading investors anxiously trying to get their hands on Facebook shares before the social media company goes public later this year.
Albukerk allegedly acquired access to the shares with a company in his wife’s name. The EB Exchange Fund then purchased those shares at a higher price, with Albukerk retaining the difference. In addition to charging investors a 5 percent commission on shares at the inflated price, Albukerk planned to charge an additional 5 percent commission to coincide with Facebook’s IPO.
The SEC’s action focuses on about $15.4 million raised from 90 investors from the fall of 2010 to January of 2011, according to the agency. The charges stem from a yearlong investigation.
“Fund managers must fully disclose their compensation and material conflicts of interest,” Robert Kaplan, co-chief of the SEC Enforcement Division’s Asset Management Unit, said in a statement. “Investors deserve better than the kind of undisclosed self-dealing present in these cases.”
Albukerk consented to the order of violation without admitting or denying guilt, according to the SEC. Albukerk and EB Financial have already agreed to pay fines and prejudgment interest of $210,499, plus a penalty of $100,000.
An attorney for Albukerk could not be reached for comment as of press time Wednesday.