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Lending Club’s former CEO investigated over share buyback

Lending Club’s former CEO investigated over share buyback
Staff
  • On October 5, 2016

RENAUD Laplanche is being investigated by the U.S. Securities and Exchange Commission (SEC) over his role in Lending Club’s $150m (£118m) share buyback.

Sources have told Bloomberg that the SEC is looking into allegations that Laplanche encouraged the US peer-to-peer platform to prop up its shares without telling the board about a potential conflict of interest.

In February of this year, the company approved a $150m share buyback. However, then-chief executive Laplanche had already pledged some of his shares as collateral for a privately-arranged loan – a fact which he did not disclose to the board. Under the terms of the loan, Laplanche was required to put up extra cash if the stock fell below a certain price.

While there is no indication that Laplanche broke any laws, the SEC is keen to establish whether his failure to disclose the loan to board members was a matter of corporate governance.

Laplanche resigned as chief executive in May of this year, after LendingClub admitted that it had falsified information on some of the consumer loans listed on its platform. Soon after his resignation, the SEC began to look into a number of reports of possible conflicts in Laplanche’s investment portfolio. In one such instance, he convinced the board to approve a $10m investment in Cirrix Capital without revealing that he had a personal stake in the fund.

Jill Fisch, a corporate governance expert at University of Pennsylvania Law School, said that when a chief executive has a personal stake in the company’s share price, it should always be disclosed to the board. She told Bloomberg: “The board relies on management and that’s why best practice is that any possible interest management has, should be disclosed.”