LendingClub Corp., a national online lending marketplace, has been fined $400,000 for the unregistered sales of loans during an almost five-year period.
Texas Securities Commissioner Travis J. Iles April 1 entered a Consent Order that reprimanded and fined LendingClub while also granting its registration as a securities dealer in Texas.
LendingClub, based in San Francisco, had voluntarily stopped its sale of notes to residents of Texas in September 2019 as the Texas State Securities Board investigated the company’s compliance with the Texas Securities Act. LendingClub cooperated with State Securities Board staff during the investigation.
LendingClub had been selling notes to Texas residents since it listed as a public company in December 2014.
Stocks traded on a national exchange in the U.S, like LendingClub's common shares, are "covered"securities, which qualify for federal exemptions from state securities regulations.
LendingClub operates an online platform that matches borrowers with investors who want to fund their loans.
Since going public, LendingClub took the position that the notes it issues and sells are also covered securities.
The consent order, however, found that LendingClub must be registered as a dealer in Texas to sell federal covered securities such as the notes.
In addition to the fine paid to the State of Texas, LendingClub will contribute $25,000 to the Investor Protection Trust, a nonprofit organization that supports investor education efforts in Texas and other states.