The Securities and Exchange Commission had a series of pointed questions for Facebook ahead of its public debut -- especially around advertising sales and the extensive control CEO Mark Zuckerberg maintains over the company he created, according to documents made public Friday.
After Facebook filed paperwork in February for its initial public offering, the SEC followed up at the end of the month with an extensive list of requests for additional information.
In response, Facebook amended its filing several times to go into greater detail on some of the topics regulators probed.
The SEC's initial 18-page letter had three subsequent followups. That kind of back-and-forth is standard between the SEC and companies pursing an IPO, and the trail of correspondence is typically released after the company has completed its offering.
The SEC sought clarity in several areas, especially around these six topics.
Zuckerberg and his control: Mark Zuckerberg owns around 23% of Facebook's shares, but his stock carries outsize voting rights that give him 31% voting power over the company.
However, he actually holds majority control: Zuckerberg has "irrevocable proxy" over the voting power of shares held by many other stakeholders. Those proxy deals mean Zuckerberg controls the voting power over almost 56% of Facebook's shares.
That makes Facebook a "controlled company," a legal designation that means it qualifies for certain rule changes and exemptions. The SEC zeroed in on that, asking Facebook to "more fully explain how the risk of Mr. Zuckerberg's control affects you and the [stockholders]."
Here's one effect: As a controlled company, Facebook isn't required to have a majority of its board members be independent of the company. It also doesn't have to have a compensation committee to review and approve the pay of Facebook's top executives, including Zuckerberg.
Privacy: The SEC wanted more details on a hot-button issue: privacy.
Many of the privacy-related questions involved Facebook's advertising. For example: "Please describe to us the level of control that users have over sharing information with you, given your collection and use of this information to deliver targeted ads and other user-focused information."
Zynga: Facebook has a deep, financially significant link with Zynga, the newly public maker of FarmVille and other games.
Facebook said in its initial filing that Zynga apps generate a "significant" number of pages on which the network displays ads, and that losing Zynga as a partner could hurt its business.
But the SEC wanted more details. It issued a road request for Facebook to "describe the material terms of your agreements with Zynga."
Facebook's updated documents revealed that revenue from Zynga represented 11% of Facebook's total sales in 2011.
Fake users: The SEC expressly asked Facebook to disclose how many of its 900 million users are "fictitious or duplicates." In an amended filing, Facebook admitted that it estimates 5% of its users are fake.
More detail on challenges, especially in mobile: In general, the SEC asked for more clarity on "any known trends or uncertainties" that Facebook was facing.
Specifically, the SEC wanted Facebook to talk more about the issues surrounding its mobile problem: A growing number of users are accessing Facebook on mobile devices, where the company hadn't yet "generate[d] any meaningful revenue."
Facebook later disclosed that its tally of daily active users is increasing faster than the number of ads served.
The mobile problems popped up again post-IPO, when a group of Facebook shareholders filed a lawsuit alleging that important specific financial information was "selectively disclosed" to big banks ahead of the offering.
Revenue: Finally, the SEC had a barrage of questions related to Facebook's sales. That included requests for clarification around the sale of virtual goods, the typical term of an advertising contract and the average price per ad.
Facebook folded many of those details into its amended filings and a response letter it sent to the SEC in late March.