What is a Private Company?

What is a Private Company?

A private company is also known as a privately held company, is a company that does not offer its trade to the public stock market.  What a private company does do, is offer shares of their company privately by ownership, traded, or exchanged privately.

Can the SEC Investigate a Private Company?

You probably hear about the SEC and their responsibilities from time to time in the securities world. It might be because of a lawsuit against an up and coming biotech company, or it might be because of what you learned in history class about The Great Depression. These examples are surface level in comparison of all that the SEC does. Let’s dive into the commonly unknown world of the SEC.


The SEC has oversight of financial institutions, outlined in the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Yet, it is not clearly defined how the private companies fall within the SEC’s jurisdiction. 

Since the SEC’s main purpose is to prevent fraud within the U.S, the enforcement of this is applied to all companies, whether or not they are registered on the national securities exchange. 

The SEC can investigate private companies through their routine review of SEC reports and schedules, referrals from other agencies, tips from investors or whistleblowers, inspections by FINRA, and news reports and the media.

One of the most notable SEC investigations of a private company is Theranos. Back in 2016 the company’s website proclaimed that “breakthrough advancements have made it possible to quickly process the full range of laboratory tests from a few drops of blood.” The company, destined to change blood testing, gained support from notable figures and was estimated to have a worth of 9 billion dollars at its peak. 

As a private company, the SEC’s investigation of Theranos raised many questions about whether other privately held companies are subject to the same investigations. 

Although many may believe that there is a sharp distinction between privately held and publicly traded companies, the SEC acted with the U.S. Department of Justice claiming that Theranos “made deceptive statements to investors when it solicited funding”, and so their actions are justified under their jurisdiction. 

Even if a company does not publicly trade shares, they are held to the same standards and expectations as a public company. The SEC will intervene if it deems a private company’s actions as misrepresented or fraudulent.

If you are needing help with the structure of your securities offering, please contact the Bradshaw Law Group today by clicking this link: https://bradshawlawgroup.com/location/contact/