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SEC charges alternative data provider with securities fraud

Securities Enforcement Alternative Data Securities Exchange Act Cease and Desist

Securities

On September 14, the SEC announced a settlement with an alternative data provider and one of the company’s co-founders (collectively, "respondents") resolving allegations that the company violated antifraud provisions by engaging in deceptive practices and making material misrepresentations regarding alternative data. According to the order, the respondents understood that companies would share their confidential app performance data if they promised not to disclose it to third parties. As a result, the respondents assured companies that their data would be aggregated and anonymized before being used by a statistical model to generate estimates of app performance. However, the respondents, between 2014 and mid-2018, utilized non-aggregated and non-anonymized data to alter its model-generated estimates to make them more valuable to sell to trading firms. The SEC alleged that the respondents violated provisions of the Exchange Act, such as Section 10(b) and Rule 10b-5 thereunder, because their misrepresentations and other deceptive practices misled subscribers regarding how the company’s intelligence estimates were calculated. The order, to which the respondents consented, imposes civil money penalties of $300,000 and $10 million. The order also provides that the company must cease and desist from committing or causing any future violations of the Exchange Act, and prohibits the co-founder from serving as an officer or director of a public company for three years.

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