A company that collects and sells alternative market data and its former CEO settled SEC charges for (i) materially misrepresenting how the company obtained its data, and (ii) engaging in deceptive customer acquisition and retention practices.

As outlined in the SEC Order, the company offers a free analytics product that helps users track the performance of their mobile apps. The SEC stated that the company represented to users of the product that their app performance data would be aggregated and anonymized before it was packaged for sale to third parties. The primary purchasers of the performance data were securities trading firms that used the data to make investment decisions.

The SEC discovered, however, that because the non-anonymized data was of greater value to trading firms, the company used the data from the free product without anonymizing or aggregating it. The SEC also found that the company falsely represented to users of its subscription service that it had internal controls and procedures for ensuring compliance with federal securities laws, including a policy not to use the data provided by public companies to generate estimates of app performance.

As a result of its findings, the SEC determined that the company and its CEO violated Section 10(b) ("Regulation of the Use of Manipulative and Deceptive Devices") of the Exchange Act and Rule 10b-5 ("Employment of Manipulative and Deceptive Devices") thereunder.

To settle the charges, the company and the CEO agreed to (i) cease and desist from future violations and (ii) pay a $10 million and a $300,000 civil money penalty, respectively.


Taking the facts that the SEC reported as correct and acknowledging that the company's conduct was materially dishonest, this still seems a bit of a stretch as a violation of the securities laws. The injured parties were the persons who used the free portion of the service; they were not purchasers of securities. Presumably, the SEC's theory of jurisdiction is based on the fact that the persons who actually purchased the company's data used that data to trade in securities. But those persons actually received better data than they should have received.

Matt Levine, the writer at Bloomberg of "Money Stuff," is noted, among other things, for the observation that "everything [or at least every bad act] is securities fraud." This case illustrates the principle.

Primary Sources

  1. SEC Press Release: SEC Charges App Annie and Its Founder with Securities Fraud
  2. SEC Order: App Annie Inc. and Bertrand Schmitt

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