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App Annie to Pay $ 10 Million to Settle SEC Fraud Investigation

App Annie, a company that collects and sells information on mobile app performance, has agreed to pay $ 10 million to settle a securities fraud investigation, the US Securities and Exchange Commission (SEC) said. United in a press release.

According to the SEC, App Annie used confidential information from app companies to generate its statistical models of app performance. He told companies that the data they provided would be aggregated and anonymized, and not disclosed to third parties. But the SEC alleged that between late 2014 and mid-2018, App Annie and its former CEO Bertrand Schmitt used data that had not been aggregated or anonymized to make its estimates more valuable to sell to commercial companies. . And, according to the SEC, App Annie “shared ideas on how trading companies could use the estimates to trade ahead of upcoming earnings announcements.”

The SEC says the company and Schmitt knew that clients of trading companies were using its information to make investment decisions and was distorting the way it generated its estimates, saying that App Annie had effective internal controls to prevent data from occurring. confidential from being misused and to ensure that it complied with securities laws.

Gurbir Grewal, director of the SEC’s enforcement division, said that App Annie and the former CEO “lied to companies about how their confidential data was used and then not only sold the manipulated estimates to their clients. trading clients, but also encouraged them to trade on these estimates, often touting how closely they correlate with actual company performance and stock prices.

He added that federal securities laws “prohibit deceptive behavior and material misrepresentation in connection with the purchase or sale of securities.”

The SEC noted that the information that App Annie collects is commonly referred to by trading companies as “alternative data” because it is not information found in a company’s financial statements or other sources of information. traditional data. The App Annie settlement is the agency’s first enforcement action accusing an alternative data provider of securities fraud.

As part of the settlement, App Annie has neither admitted nor denied the SEC’s allegations. Schmitt will pay a fine of $ 300,000 and will not be able to act as an officer or director of a listed company for three years. Schmitt said in a statement posted on his LinkedIn page that he was happy the matter was closed.

“I deeply regret that App Annie’s proceedings prior to mid-2018 resulted in an investigation and settlement,” with the SEC, Schmitt wrote. He said the company “did not in fact disclose any confidential customer information or MNPI (Material Non-Public Information) outside the company and the SEC made no such claims, allegations that we may have misrepresented with corporate clients the adequacy of our control over some of the confidential data that we used in our estimates still concerns me greatly as a co-founder and former ceo of the company.

App Annie said in a statement that over the past three years, the company “has made a number of significant changes to our operations and established a new level of trust and transparency.” The changes included the appointment of Theodore Krantz as new CEO in mid-2018, changing the way he constructs his data estimates and codifying his procedures “to ensure the exclusion of all confidential company data. of the process of generating market data estimates for our intelligence products. . “

Schmitt has resigned from App Annie’s board of directors, the company said.

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