The Securities and Exchange Commission has barred the founder and former CEO of Lending Club, an online lending company, from the securities industry.
The financial regulatory agency also brought charges against an investment fund associated with the online lender, which Renaud Laplanche led through a high-profile initial public offering four years ago.
In a release announcing its enforcement order, the SEC alleged that Lending Club Asset Management violated its fiduciary duty by advising private investment funds to invest in peer-to-peer style loans the company knew might go unfunded, to benefit its parent company Lending Club.
“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, in a release. “By using funds managed by LCA to benefit its parent company, LCA and Laplanche failed to do so.”
Laplanche, now the CEO of Upgrade, a rival fintech lender to Lending Club, and another former Lending Club executive, settled with the SEC without admitting or denying wrongdoing. Under the terms of the settlement Lending Club will pay a $4 million fine, while Laplanche must pay $200,000. He can apply for re-entry to the industry in three years. Upgrade recently raised $62 million in private funding.
“We are pleased to have resolution and closure,” said LendingClub Chairman Hans Morris in a statement. “Following an internal review in 2016, LendingClub’s Board of Directors accepted the resignation of Renaud Laplanche as Chairman and CEO of the company. The Board’s decision was not made lightly but the violation of the Company’s business practices along with a lack of full disclosure by Mr. Laplanche during the review was unacceptable.”
“The findings of the SEC further support the Board’s decision to take swift and decisive action,” Morris added.
Laplanche left Lending Club in 2016 following an internal review and public disclosure of an incident in which an employee allegedly manipulated loan data to make it appear as if those loans were originated after the company instituted an updated disclosure for borrowers, rather than before.
In an email to the Examiner, Laplanche said, “I’m glad we can now put these issues behind us, and focus on the important goals of making credit more affordable for American families and delivering great returns to investors”. He also noted that Upgrade does not have an investment advisory business like Lending Club’s.
Correction: A previous version of this article incorrectly stated that Laplanche allegedly ordered employees to change data on loans facilitated by the company.
