Private Company Executives Can Be Held Liable Under the Federal Securities Laws

An often overlooked feature of the Directors and Officers Liability landscape is that executives of privately held companies can be held liable for statements or other actions made in violation of the federal securities laws. One very recent, high-profile example of this fact involved the SEC enforcement action (and subsequent criminal proceedings) brought against the medical testing company, Theranos. There has been much discussion concerning the SEC’s willingness to scrutinize Silicon Valley unicorns, but recent SEC and Department of Justice actions involving an Indiana-based company underscore the fact that all private companies, irrespective of valuation or notoriety, and their respective executives can draw the attention of federal securities regulators.

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