The Securities and Exchange Commission identified “alternative data” as an examination priority beginning in 2020. However, until last month, it had not issued public guidance or entered into an enforcement action in this space. All that changed on September 14, 2021 with the announcement of the $10 million settlement of the SEC’s first enforcement action against alternative data provider App Annie. But even the broadly applicable takeaways are somewhat hidden in the agreement itself.
Nevertheless, the SEC has put down an important marker and has signaled where it will focus its attention in the future. For example, the SEC’s Order focuses on App Annie’s misconduct, which its CEO and co-founder orchestrated, and does not suggest there was any liability on the part of purchasers or users of its data. However, the mere fact of the settlement demonstrates the SEC’s view that alternative data may be non-public material information in the trading context. Similarly, the SEC’s Order and accompanying press release emphasizes the importance of controls, including policies and procedures, to ensure compliance with the federal securities laws.
In this article contributed to Neudata, Stacey Brandenburg and Marc Zwillinger discuss some frequently asked questions about what happened, what the settlement means, and how it might inform industry conduct.