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2011-01-05 02:47:04
Wed Jan 5, 2011 12:30am EST
Jan 5 (Reuters) - The U.S. securities regulator is scrutinizing whether it
needs to update the disclosure rules for privately-held firms as a result of
recent deals allowing investors to buy shares in Internet companies such as
Facebook and Twitter, the Wall Street Journal reported, citing people familiar
with the situation.
The rules require firms with 500 or more shareholders of record in a given type
of stock to publicly disclose certain financial information, in order to
safeguard investors' interest, the Journal said.
The inspection is at an early stage, and the Securities and Exchange Commission
(SEC) has not concluded that any of such deals broke these rules regulating
private companies, the paper said.
The SEC did not immediately respond to an email seeking comments by Reuters.
Facebook raised $500 million from Goldman Sachs and Russian investment firm
Digital Sky Technologies, in a deal that values the world's No.1 Internet
social networking company at $50 billion, according to a person familiar with
the matter. [DI:nLDE70311C]
The efforts by Facebook to raise as much as $1.5 billion outside of regulated
markets is the latest test of the walls between private and public markets.
[ID:nN04243667]
Following the Goldman Sachs-Facebook deal, the Journal said SEC investigators
also plan to examine special-purpose vehicles to verify if they are being
designed to evade the 500-shareholder rule, it said.
Goldman and Facbook declined to comment to the Journal.
Along with revising rules to protect investors from risking their money on
firms that disclose little information about their operations, the SEC is also
trying to consider the demands of private firms to raise funds, the Journal
reported.
Goldman was not immediately available for comment outside regular business
hours, while Facebook could not be reached for comment by Reuters. (Reporting
by Abhinav Sharma in Bangalore; Editing by Anshuman Daga)