Company Settles Charges of Employee Stock Option Disclosure Failures

Credit Karma, Inc. ("Credit Karma"), an internet-based financial technology company, settled SEC charges that it issued approximately $13.8 million in stock options to employees without registering the offering or complying with a registration exemption.

According to the SEC Order, Credit Karma offered the stock options intending to rely on the exemption in Securities Act Rule 701. However, Credit Karma allegedly issued far more than the amounts allowed under the rule without the provision of detailed financial statements. Although Credit Karma executives were aware of this requirement and allegedly made relevant disclosures to investors, according to the SEC, it made no such disclosures to its employees.

By failing to comply with Rule 701, Credit Karma violated Securities Act Sections 5(a) and (c). Credit Karma settled the charges by agreeing to a cease-and-desist order and to pay a civil money penalty of $160,000.