Zenefits, a San Francisco-based software company that has an insurance business, and its co-founder and former CEO Parker Conrad settled with the U.S. Securities and Exchange Commission over allegations of misleading investors.
In the SEC's order, the agency claims Zenefits misled investors in June 2014 and May 2015 by presenting false information related to the company's compliance with state insurance regulations. The SEC said Zenefits took in more than $565 million from accredited investors in a couple private offerings as a result of its "misstatements and omissions."
"Zenefits and Conrad were negligent in failing to disclose to investors that Conrad had created a computer script to enable Zenefits employees resident in California who acted as insurance brokers, and were therefore required to obtain California insurance broker licenses, to spend fewer hours on pre-licensing education than were required by the California insurance regulator," the agency wrote.
"Zenefits and Conrad were also negligent in failing to disclose to investors that the company allowed certain Zenefits employees who operated as insurance producers to transact insurance without having required licenses at the time of the transactions in which they engaged."
The SEC said Zenefits has made multiple efforts to remediate deficiencies in its licensing compliance, such as putting in place new licensing controls and improving its compliance function. The agency noted Zenefits has also resolved a number of state inquiries.
In the recent settlement with the SEC, Zenefits did not admit or deny wrongdoing and agreed to pay a $450,000 penalty. The SEC said Mr. Conrad also agreed to pay $350,000 in disgorgement in addition to $23,692.39 in interest and a $160,000 penalty. The total fines are $533,692.
Josh Stein, general counsel at Zenefits, told Becker's the settlement "closes the chapter on a journey we began 18 months ago to transform Zenefits through new values and leadership."
"We are pleased that the SEC clearly acknowledged our cooperation, our extraordinary remedial efforts, and our commitment to compliance. We look forward to continuing the important work of helping companies thrive by taking better care of their employees," he added.