The Securities and Exchange Commission (SEC) has charged data provider App Annie and its founder Bertrand Schmitt with securities fraud and fined them for “deceptive practices and making material misrepresentations about how App Annie’s alternative data was derived.”
The data from App Annie has been used in a number of industries and is cited in hundreds of news reports. The company agreed to pay for the fees in the amount of $10 million.
It was the first time the SEC has charged an alternative data provider with security fraud. App Annie will pay $10 million and Schmitt has to pay $300,000. He was also barred for the next three years as an officer or director of a public company.
App Annie is alleged to have lied to companies about how it aggregated and used market data. As one of the largest providers of data on mobile app performance, App Annie assured companies that they would not share their data with third parties or disseminate information without first aggregating and anonymizing it.
App Annie knew full well that trading companies made investment decisions based on the data and estimates the company produced and even shared ideas with trading firms on how their data could be used in advance of upcoming profit announcements.
Erin Schneider, head of the San Francisco regional office of the SEC, said App Annie had gone to great lengths to reassure its customers that the financial and app-related data it sold was the result of a sophisticated statistical model and that it had the controls to comply with federal securities laws.
While the SEC order specifically stated that the company violated a number of anti-fraud provisions, App Annie was allowed to agree to a cease-and-desist order without admitting or denying the allegations.
App Annie, in a statement, said that in response to the investigation and charges, it has appointed a new CEO and executives, introduced changes to how it creates data estimates and introduced new procedures “to ensure the exclusion of all confidential public company data from the process of generating market data estimates.”
John Bambenek, the principal threat hunter at Netenrich, said the fine would not hurt App Annie overall and said it was big business to get bulk data on consumer behaviour and that there was no way to guarantee the data would not be misused.
For more information, read the original story in ZDNet.