The U.S. Securities and Exchange Commission settled withZenefits and its former chief executive officerover charges the company misled investors by failing to discloseemployees were selling insurance without a license.

Zenefits, a venture-backed broker of health insurance tobusinesses, will pay $450,000, and Parker Conrad, the co-founder and ex-CEO, willpay about $534,000. The SEC said Zenefits, under Conrad’sleadership, sold insurance in states without the appropriatelicenses and that Conrad had created a software tool to help skirtthe time requirements for legally mandated pre-licensing trainingin California. Neither the company nor Conrad admitted wrongdoingin the settlement.

The fines pale in comparison to the $11 million in penaltiesthat Zenefits has agreed to pay in at least 40 states. Last year,Zenefits reset expectations with investors by renegotiating itsvaluation to $2 billion from $4.5 billion in exchange for avoidingpotential lawsuits. The company has raised more than $550million since it was founded four years ago.

“This settlement closes the chapter on a journey we began 18months ago to transform Zenefits through new values andleadership,” Josh Stein, general counsel for Zenefits, said ina statement. “We are pleased that the SEC clearly acknowledged ourcooperation, our extraordinary remedial efforts, and our commitmentto compliance.”

The fine is a sign that the SEC, which mainly focuses on publiccompanies, may be more willing to step in when startups commit badbehavior. Mary Jo White, former head of the SEC under PresidentBarack Obama, indicated last year that the agency would look moreclosely at private companies.

The SEC was particularly critical of decision-making by Conrad,who has since moved on to starting another company. “Conrad wasaware that in certain instances employees were speaking tocustomers after having passed their qualifying exams but beforeobtaining their licenses from the issuing authority,” the SEC saidin a filing. “Conrad understood, or should have understood, thatthis was inconsistent with California and Arizona law, but allowedthe practice to continue.”

In an emailed statement, Conrad said: “I’m pleased to havereached an agreement with the SEC regarding Zenefits, and I’mincredibly proud of what we built there and grateful to have workedwith such a talented group of people.”

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