SEC set to file charges over private trading The Securities and Exchange Commission is close to filing civil charges tied to the trading of private stocks against at least three executives, making it the first case since regulators began reviewing secondary markets more than a year ago. The fresh scrutiny comes as Congress weighs laws to loosen restrictions on private trading, allowing private groups to have more shareholders and market their stock to a wider range of investors, to make it easier for start-up companies to raise capital and create jobs. It also comes just months ahead of an expected initial public offering for Facebook, which has been the most heavily traded private stock. The SEC notified Keith Daubenspeck and Dwight Badger, two executives of Advanced Equities, a private shares investment firm, in January that they may face charges through so-called Wells notices, according to regulatory disclosures. The executives said the SEC's Chicago office sent the Wells notices in connection with a 2009 private offering. Mr Badger and Mr Daubenspeck both stated in regulatory filings that they are "prepared to aggressively defend" themselves. Frank Mazzola, who worked at Advanced Equities from 2006 until late 2009 when he launched Felix Investments, also received a Wells notice, according to his regulatory disclosure. Mr Mazzola said he received a warning from the Financial Industry Regulatory Authority, the self-policing group overseeing Wall Street, in September 2011 and the SEC in August 2011 relating to "certain sales activity in 2010." Mr Mazzola said in the filing that he "believes that he acted appropriately at all times in this matter" and was prepared to "aggressively defend" himself. Felix Investments also received Wells notices, a person familiar with the matter said. The charges could be announced as soon as this week, this person said. In December 2010, the SEC sent letters to several firms doing business in the secondary market, a largely unregulated area, to better understand how the market operated and how shares of private companies were priced. A concern has been that individual investors, who may be wealthy but not sophisticated, may receive insufficient disclosures. Trading of shares in private companies has blossomed amid weak public market conditions. Volumes doubled last year to a record $9.3bn, according to Nyppex, an illiquid securities trading consultancy. ut trading is not centralised like it is for public equities. Though there are large intermediaries such as brokerage SecondMarket, and more recently established groups Cantor Fitzgerald and GFI Group, deals typically also involve several individual brokers acting as middlemen. US lawmakers in the House of Representatives recently passed a bill that would lift the ban on "general solicitation" of non-registered stock to investors who did not meet the SEC's standards for sophistication. The bill would also allow a private company to have up to 1,000 shareholders, up from 500, before having to file public financial statements. But Senate Democrats have not yet brought a companion bill to the floor as they weigh some members" fears that the new rules would be too lax.