The SEC’s enforcement action with a leading seller of market data (App Annie Inc.) signals its concern with misleading data use representations. While the data at issue was not “personally identifiable” information, but instead corporate confidential information, the SEC’s concerns mirrored those that we have previously seen from that agency, as well as others, regarding representations made about personal information.

App Annie provides investment insights to help its trading firm clients identify potential investment opportunities. Information it provides includes information about mobile application performance, like app downloads, usage, and revenue. One of App Annie’s products, App Annie Connect, provides statistical model-generated “estimates” of application performance for its customers based on “aggregated pools of information.”  The App Annie Connect Terms of Service indicate this is done in order to ensure the data cannot be identified as coming from a particular company.  According to the SEC, App Annie falsely assured its clients that the company had policies in place to prevent the disclosure of nonpublic information, when in fact App Annie used its non-aggregated, non-anonymized, nonpublic confidential data to alter its model-generated estimates to make them more accurate and more valuable to trading firms.

The SEC claimed that these actions constituted fraud in connection with the purchase or sale of securities, in violation of Section 10(b) of the Securities Exchange Act, because App Annie’s clients used the “estimates” to make purchases and sales of securities.  Without admitting fault, App Annie consented to a cease and desist order and payment of $10 million penalty.

 Putting it Into Practice: This settlement is a reminder that the SEC is looking closely at companies’ representations about data use, and expects that representations made will be followed.