SEC Fines 'Dark Pool' Operator $2 Million
WASHINGTON (CN) - The SEC on Friday charged a dark pool operator with improperly using subscribers' confidential trading information to market its services.
Dark pools are private fora for trading securities.
The SEC sued Liquidnet Inc. in an administrative cease and desist order.
Liquidnet agreed to pay a $2 million penalty, the SEC said.
"Regulations require an alternative trading system (ATS) to establish and enforce safeguards and procedures to protect the confidential trading information of its subscribers," the SEC said in a statement. "Among them is limiting access to subscribers' data to employees who operate the ATS or have a direct compliance role."
The SEC claims that for three years Liquidnet "violated its regulatory obligations and its own promises" by allowing a business outside the dark pool access to its confidential trading information.
"Between 2009 and 2012, Liquidnet sought to expand its business and to find additional sources of liquidity for its ATS [alternative trading system] by offering its services to corporate issuers and control persons of corporate issuers, as well as to private equity and venture capital ('PE/VC') firms looking to execute large equity capital markets transactions," the SEC said in its administrative order. "This effort was undertaken, in part, through the use of confidential information about Liquidnet customers' intentions to buy or sell securities. By improperly using that information and not keeping it confidential, Liquidnet violated the promises that it had made to its customers and failed to meet its obligations under Regulation ATS."