Can someone explain this in simple language?
This requires a high level of trust as there is a lot of financial information at stake.
Carta seems to be taking this confidential information and is potentially sharing it with other investors and soliciting investors to sell their shares.
This is a big no-no.
They know where you live and how much is your credit score you bank balance
The “service” Carta is selling here is your company to other people.
Given 99% of private companies have specific limitations on not being able to do this with a company’s securities, this almost certainly runs afoul of SEC, FINRA, and other fraud regulations.
These are all people with whom you have entrusted important rights such as dressing nicely, staying relatively sober, and not poking the cake. Additionally, the wedding venue has a fire safety limit of 150 people. Any more than this and the authorities shut you down for abusing the privileges they give to small weddings.
Well now imagine that party.com has been emailing your neighbours and mortal enemies the Joneses saying the Smiths have two seats they want to sell and that Beyoncé is going to be there. They also help the diving sell half their table to what turn out to be classical music supremacists who show up protesting Beyoncé’s pop music. One of them also gets drunk and pokes the cake. Thanks a bunch party.com.
In real life, shareholders can do unhelpful things or act with downright hostility so you need people you know and who you trust to behave themselves.
The SEC also give you an exemption from having to register with them (and publish your accounts) but only if you have fewer than 500 shareholders. If a big shareholder splits their holding and sells to a bunch of random people then they risk pushing you over that limit.
Carta / party.com are abusing their position by marketing your shares / wedding invitations behind your back.