CHINA TOPIX

03/28/2024 01:54:16 pm

Make CT Your Homepage

Citigroup Unit Settles SEC Charges with US$5 Million Penalty

Citigroup sign

A unit of financial giant Citigroup charged with failing to protect confidential customer data will pay US$5 million in fines to settle the case.

The Securities and Exchange Commission (SEC) said the unit, LavaFlow Inc., agreed to the settlement without admitting or denying the charges.

Like Us on Facebook

A Citigroup spokesman welcomed the development, saying the bank was "pleased to put this matter behind us."

LavaFlow operates what is known as an "alternative trading system" (ATS), which competes with traditional exchanges.

The SEC filed the charges on Friday claiming LavaFlow did not have enough safeguards and procedures to protect private trading information of its subscribers. 

The alleged lapse resulted in another affiliate gaining access to the data and using them in routing certain orders, according to the SEC. 

LavaFlow is the fourth ATS operator to face SEC charges over alleged market rules violations since 2011. 

In June, the SEC brought charges against Liquidnet, accusing the ATS operator of using confidential trading information of customers to market its services. 

The SEC said the US$5 million penalty on LavaFlow is the largest ever imposed on an ATS  provider. 

The crackdown on ATS operators includes investigations into a trading system called dark pool, which allows investors to trade without revealing their identities. 

Dark pools also keep quotes out of public view, raising concerns that their operations could undermine traditional exchanges and price quality. 

In an effort to address those concerns, the SEC is planning to introduce new rules requiring greater transparency from private trading venues. 

Dark pools have also been the subject of Financial Industry Regulatory Authority (FINRA) investigation into alternative trading platforms. 

FINRA filed a case recently against Goldman Sachs over violations of pricing rules in its ATS.

The case closed on July 1 with Goldman Sachs agreeing to pay a fine of US$800,000 to FINRA. 

A dark pool that belongs to Barclays is fighting fraud charges that New York Attorney General Eric Schneiderman filed against the bank. 

Real Time Analytics