FR 2025-03171

Summary of the Document

The Securities and Exchange Commission (SEC) has published a notice concerning Marqeta, Inc.’s application for a special order under the Investment Company Act of 1940. Marqeta, a company known for its technology-driven payment card issuing platform, is seeking recognition as a business primarily engaged in activities outside the realm of investing in securities. This request centers on clarifying Marqeta’s business model, which focuses on developing payment card technologies rather than being an investment company. The SEC is allowing interested parties until March 2025 to request a hearing or express concerns regarding the application.

Significant Issues and Concerns

While the document provides detailed insights into Marqeta's operations and financial approaches, there are aspects that could be complex for a general audience. The language and legal terms used, especially those related to the Investment Company Act and investment instruments, might be challenging to decipher for those without legal expertise. Moreover, the methodology for calculating the proportion of assets held in non-capital preservation instruments requires further clarification to ensure transparency and comprehension.

The application stipulates that Marqeta should not invest more than 10% of its total assets in non-capital preservation instruments. However, guidance on how these investment decisions are monitored to remain within this limit is not explicitly detailed, which may pose potential ambiguity in ensuring adherence to regulatory standards.

Additionally, the document discusses the time allocation of Marqeta’s officers and directors. A clearer exposition of these details would assure stakeholders that the company’s leadership is focused appropriately on regulatory compliance and the company’s primary business activities.

Impact on the Public and Stakeholders

Broadly, the document underscores the SEC’s role in ensuring that organizations adhere to the laws governing investment practices. The SEC's scrutiny aims to protect investors and maintain financial market integrity, serving the public interest. Clear regulatory guidelines and adherence to them benefit the public by promoting transparency and protecting their investments.

For specific stakeholders, such as investors and analysts interested in Marqeta, the document serves as a formal update on the company’s strategic direction. Positively, this move could be seen as Marqeta’s commitment to focusing its resources on its core technology development, potentially fostering innovation and growth. Such clarity could influence investment decisions and bolster confidence among stakeholders seeking engagement based on Marqeta’s primary business rather than speculative investment activities.

Conversely, there is potential concern if securities activities are not sufficiently monitored relative to business operations. Without robust clarity and oversight mechanisms, investors may be wary of financial risks associated with securities mismanagement, which could ultimately impact Marqeta’s market perception and shareholder value.

In summary, while this document reflects Marqeta's intent to specify its operational focus clearly, ensuring clarity and transparency in financial practices and leadership activities will be crucial in aligning with investor expectations and regulatory mandates.

The document describes an application by Marqeta, Inc., which seeks an order from the Securities and Exchange Commission (SEC) to confirm that it is primarily engaged in technology-based services and not investing in securities. The application provides insight into how Marqeta manages its finances, including cash reserves, revenue sources, and investment income.

Financial Assets and Holdings

Marqeta outlines its financial holdings as of September 30, 2024, which include substantial investments in various financial instruments. Specifically, the company reports holding approximately $48.6 million in money market funds, $199.2 million in Treasury bills, $207.0 million in U.S. Government securities, $16.6 million in commercial paper, $10.5 million in investment-grade asset-backed securities, $49.3 million in investment-grade corporate debt securities, and $22.0 million in certificates of deposit. These investments are described as part of their strategy to conserve capital and maintain liquidity for their operational needs.

Revenue and Investment Income

Marqeta provides a detailed account of its revenue over the past few fiscal years. The company reports revenues of $676.2 million in 2023, slightly down from $740.8 million in 2022, but significantly higher than $517.2 million in 2021 and $290.3 million in 2020. In contrast, the company's net investment income, which comes from their financial holdings, was relatively minor, at $0.6 million in 2021, increasing to $8.6 million in 2022, and $9 million in 2023. This indicates that while Marqeta does earn from its investment holdings, the primary source of its income is from its core business operations.

For the first nine months of 2024, Marqeta reported net investment income of $27.8 million, which was a decrease from $30.7 million in the same period in 2023. The reduction is attributed to lower interest rates in the fixed income markets. It is important to note that notwithstanding these investment income figures, the document emphasizes that the vast majority of Marqeta's revenue results from operational activities rather than investment activities.

Investment Strategy and Compliance

One issue highlighted in the document is Marqeta's method of investment. The company asserts that no more than 10% of its total assets will consist of non-capital preservation instruments. This assertion is crucial as it supports Marqeta's claim that it is not an investment company. Marqeta's financial strategy aims to use its holdings for capital preservation, which aligns with their primary business rather than speculative investing. The focus on transparency emphasizes the importance of clarity in how this 10% threshold is calculated, particularly in light of potential regulatory scrutiny.

Overall, while Marqeta maintains significant holdings in various financial instruments, these are primarily for liquidity and operational support rather than speculative purposes. This approach supports its application to be recognized as an entity primarily engaged in providing technology-based payment card services, distinct from being an investment company.