Boston, MA 07/28/2014 (wallstreetpr) – A record fine of $5 million has been imposed’ on Citigroup Inc. (NYSE:C)’s Unit, LavaFlow, as settlement with the SEC on charges of failing to protect customer’s confidential data. LavaFlow had been accused’ of letting an affiliate gain access to its system and use confidential data related to subscriber orders. The orders were at the time not available to the public, so LavaFlow was required to protect it.
LavaFlow Fails to Admit or Deny Claims
The latest crackdown by the SEC is part of an effort to restore investor confidence in the way the U.S stock market operates in terms of privacy levels. LavaFlow is a Citigroup unit that operates an alternative trading system ATS. The SEC has already said that LavaFlow will settle the fine without having admitted or denied the charges.
The SEC had accused the unit of failing between 2008 and 2011 to protect its subscriber’s confidential trading information and, as a result, another unit used the data, to directly influence the route of certain orders. The $5 million that was imposed’ on LavaFlow includes a $2.85 million penalties and $1.85 million in disgorgement of money.
Scheme Ran for Three and Half Years
Unlike secretive dark pools, Lava Flow is an electronic communication network that can display information about pending orders. Despite this, the system is supposed to keep individual requests of buy and sell confidential. LavaFlow was accused’ of allowing smart order router, access to information for three and a half years where it traded more than 400 Million shares based on subscriber information.
The SEC’s director, Andrew Ceresney, has already reiterated that it is the responsibility of alternative trading’s system to protect any confidential information from their clients. Citigroup Inc. (NYSE:C)’s seems to be satisfied with the settlement after it said in a statement that it was happy to put the matter behind it.
