Credit Karma fined by SEC over stock options disclosures

SAN FRANCISCO — Regulators have slapped Credit Karma with a penalty linked to the fast-expanding financial services technology company’s failure to properly disclose the issuance of stock options to its employees.

The Securities and Exchange Commission penalized Credit Karma $160,000 for the regulatory violations. Credit Karma failed to properly register certain stock option offerings issued to employees, the SEC said.

“Registration requirements exist to ensure that all investors have access to important information before deciding to invest” Jina Choi, director of the SEC’s office in San Francisco, said in a prepared release on Tuesday. “This is equally true for employees who are investors in the companies where they work.”

San Francisco-based Credit Karma has, since 2011, provided equity grants to employees in the form of stock options, according to an SEC filing that detailed the violations and Credit Karma’s settlement with the federal regulators.

“From Oct. 1, 2014, through Sept. 30, 2015, Credit Karma issued approximately $13.8 million in stock options to its employees,” the SEC filing stated.

The $13.8 million exceeded a regulatory threshold of $5 million above which issuers of stock options must provide a full disclosure about the issuance of the stock. Corporate financial information and risk factors are often included in registration statements.

Credit Karma issued the stock options at a time when the company hired employees at a dramatic pace amid explosive growth in the company’s members. Tech companies, large and small, often use stock options as tools to recruit and retain skilled workers.

“Between 2014 and 2016, Credit Karma headcount increased by a factor of five to support an additional 20 million new members,” Credit Karma stated in comments emailed to this news organization.

At the outset of 2014, Credit Karma employed roughly 100, and by the end of 2016, the headcount had zoomed to about 500.

At present, Credit Karma employs roughly …read more

Source:: The Mercury News

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