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SEC is ramping up its investigation of pre-IPO trading

The Securities and Exchange Commission is starting to take a closer look at rapidly growing private companies and the brokerage firms who help them trade their private stock almost entirely away from the watchful eyes of regulators.

An SEC filing from Nov. 25 confirms the regulatory agency is investigating NetCirq LLC, an unregistered brokerage firm that “resells private securities and portfolio interests creating a secondary market for private equity,” according to a Wall Street Journal report.

The filing suggests the SEC is concerned unregistered brokerage firms such as NetCirq and others may have violated the Dodd-Frank Act by engaging in “swaps,” or agreements whose terms are based on a future event.

One of the tenets of the Dodd-Frank Act was the regulation of swaps. Some have pinned credit default swaps as one of the key factors that contributed to the economic collapse in 2007.

The SEC investigation comes as the tech-bubble continues to grow and many tech companies have gone public. Others, such as Uber and Snapchat, have been valued in the billions of dollars, but their stock remains held entirely by employees, venture capitalists and other private investors.

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