Akin Gump Lawyers Discuss SEC’s First-Ever “Alternative Data” Action in Westlaw Q&A

Thomson Reuters Westlaw has published a Q&A with a trio of Akin Gump partners discussing the U.S. Securities and Exchange Commission’s (SEC) recent enforcement action against App Annie, Inc. In the Q&A, Akin Gump litigation partners Michael Asaro and Peter Altman and investment management partner Brian Daly discuss the significance of the settlement—the SEC’s first-ever “alternative data” action—as well as the enforcement landscape facing buyers and sellers of alternative data.

Among the topics covered the group discussed:

The SEC’s ruling in the case – “App Annie secretly made its estimates more accurate by applying adjustments based on data that was not anonymized or aggregated,” finding that they were “material misrepresentations ‘in connection with the purchase or sale of securities’ because App Annie knew and actively encouraged its clients trade securities based on the estimates it was selling.”

Its impact on alternative data users – “In the App Annie action, the subscribers were identified as victims of the fraud. I think users of alternative data can take some comfort in this. It means the SEC is not looking to penalize investment firms that have a good faith belief, based on reasonable diligence, that the alternative data they are purchasing was obtained appropriately.”

Future enforcement for actions involving alternative data – “As a follow up to the App Annie case, the SEC appears to be focused on the policies and procedures that investment advisers have in place to diligence alternative data vendors. […] If the SEC finds situations where investment advisers utilize alternative data without having sufficient procedures and the provider of the data engages in App Annie-like conduct, we could see enforcement actions based on these regulations, which have a lower bar for the government to establish a violation than Rule 10b-5.”

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