Liquidnet reached a $2 million settlement with the SEC over charges that the institutional dark-pool operator used subscribers’ confidential information to market its services, the SEC said Friday.
Liquidnet violated both “regulatory obligations and its own promises” to subscribers from 2009 through late 2011 by allowing a separate business unit to access the data, according to a news release from the Securities and Exchange Commission. Liquidnet reported to its dark-pool subscribers that their trading information was confidential.
Liquidnet provided employees on its equity capital markets desk with access to the confidential data, which was then used to market the ECM’s services, the SEC said in the news release. Among the information accessed were subscribers’ locations, approximate assets under management and investment styles.
“ECM employees used dark-pool subscribers’ trading data to advise issuers about which institutional investors they should meet during investor conferences or non-deal road shows. They also used dark-pool subscriber data to advise ECM customers when they should execute transactions in the (automated trading systems) given the liquidity the ECM employees could see in the dark pool.”
Liquidnet neither admitted or denied the charges, according to the SEC release.
In a statement, Liquidnet said it has improved its level of transparency and control. “The SEC findings were largely consistent with what we self-disclosed to clients in June 2012,” according to the statement. “None of the shortcomings identified resulted in any Liquidnet member or customer being disadvantaged or otherwise harmed with respect to any Liquidnet order or trade. However, as a firm, we hold ourselves accountable.”
