The SEC has charged a New York-based brokerage firm that operates a dark pool alternative trading system with improperly using subscribers' confidential trading information in marketing its services.
Regulations require an alternative trading system (ATS) to establish and enforce safeguards and procedures to protect the confidential trading information of its subscribers. Among them is limiting access to subscribers' data to employees who operate the ATS or have a direct compliance role.
An SEC investigation found that Liquidnet Inc. violated its regulatory obligations and its own promises to its ATS subscribers during a nearly three-year period when it improperly allowed a business unit outside the dark pool operation to access the confidential trading data. Employees in that unit used the confidential information about Liquidnet's dark pool subscribers during marketing presentations and various communications to other customers. Liquidnet also used subscribers' confidential trading information in two ATS sales tools that it devised.
SEC examiners spotted potential data access problems during an examination of Liquidnet and referred the matter to the Enforcement Division for further investigation. Liquidnet has agreed to settle the SEC's charges and pay a $2 million penalty.
For more information :SEC Charges New York-Based Dark Pool Operator With Failing to Safeguard Confidential Trading Information
