Refresher:

Q1: SecondMarket reports $115.4M in transactions, a 52% quarter-on-quarter increase, 152 percent over the six months prior. Bloomberg puts them on track to move over $1B through the company in 2011.

Q2: SecondMarket posts a total of $268M in 2011 so far. Not too close to that $1B in 2011, but the good news is that they now report their 1Q as having been $156M instead of the originally reported $115.4M. How'd they lose track of the $40.6M? Beats us! While touting their totals, they fail to put the full Q2 take at the top: $112M, a 32.2% quarter-on-quarter increase a 28.2% decrease in trading volume, not quite the 52% meteoric growth their Q1 report clocked in—but they touted their 75% year-over-year.

And today?

Q3: $167M in transactions, putting them year-to-date at $435M. This leaves them a solid three months to cover a pithy $565M and meet that $1B in 2011 mark. Math!

They're touting a 75% year-to-year uptick, which you'll notice they also did in Q2, but they are not touting—take a guess—their 9.4% quarter-to-quarter increase 49% quarter-to-quarter increase in trading volume. But there's something missing from this, because:

SecondMarket's quarter-to-quarter trading volume is dropping like a ball in a Mets outfielder's glove is still only up 7% from Q1, which is not entirely like a fly ball in CitiField, but isn't exactly a double, either. That's a 49% quarter-to-quarter increase on a quarter in which they were down 28.2%. That may have something to do with falling short on their much-hyped potential to broker Facebook shares.

Also, earlier this month:

SecondMarket exceeded the 75,000 participant mark, with more than 7,000 individuals and institutions signing up in the third quarter. This represents nearly a 10% increase quarter-on-quarter and 333% increase since Q3 2010.

That sounds nice! But means nothing. Why?

Because you don't need to have a million dollars to sign up for it. You can be as broke as us and put SecondMarket companies on your "Watch List!" [Kind of like signing up on foursquare just to avoid people you hate, by "friending" them and not checking in anywhere.]

Speaking of foursquare, elsewhere in their Q3 report, we learn that foursquare and Gilt Groupe remain in the most watched companies on SecondMarket, though their positions on that list (#5 and #9, respectively) are unchanged. In the "Rising Stars" section, New York-based Turntable.FM saw a 500% uptick in "Watchers." Also on that list are Jetsetter, KickStarter, and ZocDoc: all New York companies!

This would be nice if that number mattered in the least.

500%! 66 Watchers! That means that Turntable.FM started out with 11 Watchers in Q2, and picked up 55 "Watchers" in those three months. Meanwhile, ZocDoc climbed a sad 142% to 63 Watchers, which means they picked up 37 Watchers from Q2. The difference in SecondMarket's "Rising Stars" are 18 people clicking the "Watch" button, which warrants the question: WHO WILL WATCH THE WATCHERS?

In short:

• SecondMarket's Q3 results look downright tertiary compared with their Q1 boasts.
• They're going to fall short of the $1B in trading volume Bloomberg pegged them hitting in 2011 at the beginning of the year.
• The statistics about "Watchers" mean very little.
• But hey, have you heard about this Turntable.FM thing?
• Finally, if Facebook would stop being such bummers and let SecondMarket move their stock, life would be way cooler.

Also, they'd be sued by people who don't really understand their role in trading on secondary markets a lot less. Which helps.

CORRECTION: Our math originally reflected the Q1 report released by SecondMarket in May; we missed the footnote on their Q2 report correcting their first quarter's results by $40.6M. So it looks like TechCrunch's math was right, even if they didn't report the loss in the second quarter, which takes some of the shine off of Q3. Finally, Bloomberg were the ones to put SecondMarket on track for $1B in 2011. We regret the error.

Mr. Arrington flashes his "first amendment" gang sign.

Betabeat published a story yesterday about the ways in which tech investors who write about private companies on public blogs might run afoul of SEC regulations. It focused, naturally, on Mike Arrington, who saw the post around 2 a.m. this morning and responded with this tweet:

"Screw that. Let me introduce you to the first fucking amendment to our constitution."

Mr. Arrington failed to provide any links to the first amendment, but luckily, Betabeat had spent yesterday afternoon conversing with Prof. John Coffee of Columbia University, one of the foremost experts on securities law in the nation.

"I do agree with Ralph Ferrara that the rules established by the Securities and Exchange Act of 1934 apply to public discussion of private companies in the same way it does to public companies," said Prof. Coffee.

Prof. Coffee also agreed with Mr. Arrington that the first amendment offers some protections to bloggers writing about private companies in which they are investors with inside knowledge. "It's not just about the sin of omission. Otherwise it would be impossible for anyone to write about companies with attaching a full prospectus to every post."

The argument, should a case go to court, says Prof. Coffee, would be about proving deception. "Can you prove that this blogger wrote something which wasn't their honest opinion, or show that they intended to deceive others?"

The portion of the Securities and Exchange Act of 1934 on which all this hinges is section 10 b-5: Employment of Manipulative and Deceptive Practices:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

1. To employ any device, scheme, or artifice to defraud,
2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
3. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

So the answer is, yes and no. Investors like Reid Hoffman, who wrote a post on TechCrunch about why Greylock invested in Groupon, are not guilty of fraud simply because they neglected to mention, let's say, the $400 million a year Groupon was losing.

But by blogging publicly about the investment, and knowingly omitting a material fact about the company's finances, Mr. Hoffman opened himself up to an investigation by the SEC or charges of fraud from investors who believe they suffered a financial loss as a result of his post (see Rochez Bros. vs Rhoades).

In Mr. Hoffman's case, charges of market manipulation might center around the long expected IPO or the robust secondary market for trading equity in Groupon. And as Prof. Coffee points out, the fact that the secondary markets are much smaller and far less transparent than the public markets, means that manipulation is a much more serious issue.

"Especially in the very thin, private secondary markets, where there is little liquidity and share prices are more subject to manipulation, investors who blog publicly and don't disclose contrary interest, are in violation of 10 b-5."

P.S.--"The winner from this group receives the Disrupt Cup and $50,000, taking over possession from Disrupt New York winner Getaround. Without further ado, the runners-up is Prism Skylabs. And the winner is…Shaker! Disclosure: TechCrunch founder Michael Arrington is an investor in Prism Skylabs and is a pending investor in Shaker."

"When this activity first started to appear two years ago, a lot of investors said the sky was falling," said a local VC. "Now it's just the opposite."

A lot of venture funds have found that secondary markets make it possible to provide tangible returns to LPs without having to hit the home run of an IPO. It is also a good way to provide founders and early employees with a reward without having to raise a new round that adds more chefs to the kitchen.

An interesting development, one source tells Betabeat, is that many companies are now fencing off these transactions on SecondMarket, so that shares can only trade between current employees, investors and a select group of hand picked outsiders.

For those who see secondary markets as an elitist playground, this is probably just a galling confirmation. It is the same model being adopted by asset managers like PIMCO, who have begun to trade on SecondMarket.

But for start-ups looking to add strategic investors without the complication and cost of a new round, which can bring legal fees and bruised egos, this probably looks like a very appealing option.

Companies like Sharepost and SecondMarket, Gate's most well known New York competitor, rely on privately managed auctions, brokerages and trading specialists to set prices and transact the share of tech companies like Facebook.

Gate is attempting to build an end-to-end electronic trading platform that will provide customers with neutral research and a more liquid market.

"We fundamentally believe that in the end, this will provide better price discovery, and thus better opportunity for everyone," Gate CEO Vince Molinari told The Observer. "We're taking it out of the backroom where brokers get phone calls and giving the buyers and sellers a platform to negotiate without a middleman, so the power goes to the participants."

Of course, price discovery may not be in the interest of some of the high flying tech companies like Facebook, Zynga and LinkedIn. Facebook's shares trade on secondary markets like Sharepost far above the valuation given by the recent Goldman Sachs investment.

"Absolutely for companies like Facebook and Twitter, the outliers, this private model may work fine" says Molinari. "But I think there is a paradigm shift in the way private companies are looking to raise capital. Smaller, less well know firms will benefit from our more liquid, more transparent marketplace."

Gate recently sent a proposal to the SEC pushing for changes to the current rules that allow no more than 500 shareholders in a private company.

Several more acquisitions will be announced by Gate in the coming months, according to a source close to the company, as the market for private shares of technology companies continues to heat up.

bpopper [at] observer.com | @benpopper