SEC Charges LendingClub Asset Management and Former Executives With Misleading Investors and Breaching Fiduciary Duty

09/28/2018

FOR IMMEDIATE RELEASE
2018-223

Washington D.C.   —   The Securities and Exchange Commission today charged San Francisco-based LendingClub Asset Management LLC (formerly known as LendingClub Advisors LLC) and its former president Renaud Laplanche with fraud for improperly using fund money to benefit LendingClub Corporation, LCA’s parent company that Laplanche founded and for which he served as CEO.  LCA and Laplanche along with Carrie Dolan, LCA’s former CFO, also were charged with improperly adjusting fund returns.

All three have agreed to settle the agency’s charges against them and will pay more than $4.2 million in combined penalties.  The SEC also barred Laplanche from the securities industry. 

According to the SEC’s order, LCA provides investment advisory services to several private funds that purchase loan interests offered by LendingClub Corporation, a publicly-traded online marketplace lending company.  LCA and Laplanche caused one of the private funds it managed to purchase interests in certain loans that were at risk of going unfunded, to benefit LendingClub, not the fund, in breach of LCA’s fiduciary duty.  The order also finds that LCA, Laplanche, and Dolan improperly adjusted monthly returns for this fund and other LCA-managed funds to improve the returns they reported to fund investors.

“Investment advisers have an obligation to put their clients’ interests ahead of their own,” said Daniel Michael, Chief of the SEC’s Complex Financial Instruments Unit.  “By using funds managed by LCA to benefit its parent company, LCA and Laplanche failed to do so.”

“Investors depend on fund advisers to give them the straight scoop on performance so they can make informed investment decisions,” said Jina Choi, Director of the SEC’s San Francisco Regional Office.  “Advisers who adjust their valuation processes to boost results are in breach of their duties to investors.” 

The SEC’s order finds that LCA, Laplanche, and Dolan each violated the antifraud provisions of the Investment Advisers Act of 1940.  To settle the SEC’s charges, LCA, Laplanche and Dolan agreed to pay penalties of $4 million, $200,000, and $65,000, respectively.  Laplanche also agreed to a securities industry bar and investment company prohibition.  The SEC’s order permits Laplanche to apply for re-entry after three years.  LCA, Laplanche, and Dolan agreed to the entry of the SEC’s order without admitting or denying the findings.

The SEC’s Enforcement Division determined not to recommend charges against LendingClub Corporation, which promptly self-reported its executives’ misconduct following a review initiated by its board of directors, thoroughly remediated, and provided extraordinary cooperation with the agency’s investigation.  LCA also reimbursed approximately $1 million to investors who were adversely impacted by the improperly adjusted monthly returns.

The SEC’s investigation was conducted by Jason Casey and Amy Sumner of the Complex Financial Instruments Unit and Chrissy Filipp and Crystal Boodoo of the San Francisco Regional Office.  The case was supervised by Laura Metcalfe, Monique Winkler, and Erin Schneider.  The SEC appreciates the cooperation of the U.S. Department of Justice.

###

In less time than it takes to read this web page . . .

Exclamation Mark

You can check out the background of an investment professional by using Investor.gov.  It’s a great first step toward protecting your money.  Learn about an investment professional’s background, registration status, and more.  

iPad with graphs