(Bloomberg) -- The Securities and Exchange Commission sued Virtu Financial Inc. on Tuesday in federal court for alleged policy lapses that the regulator said could have let employees access confidential information behind customers’ trades.
The SEC said that for a 15-month period, “virtually all employees” at subsidiary Virtu Americas LLC could access confidential trade information, including the name of the customer, the name of the security purchased by the customer, the execution price, and the execution volume. The regulator did not accuse Virtu of misusing information.
“We strongly disagree with the SEC’s position and will defend ourselves vigorously,” Virtu spokesman Andrew Smith said in a statement.
In addition to executing trades for others, Virtu makes its own trades. The SEC said this made Virtu’s alleged failure to prevent possible misuse of confidential information “particularly important.”
The SEC said Virtu, which processed about 25% of market orders placed by US retail investors at the time, failed to establish and enforce policies to prevent the misuse of material nonpublic information. These alleged lapses came as company repeatedly said it used “information barriers” and “systemic separation between business groups” to protect confidential data, according to the regulator.
Virtu made misleading claims to at least six customers about its procedures for safeguarding the information, the SEC said. The agency said the information could have been valuable to traders because it could reveal which Virtu customers were trading in the market, in what securities, as well as the direction and size of their orders.
The case is Securities and Exchange Commission v Virtu Financial Inc., 23-cv-8072, US District Court, Southern District of New York.
--With assistance from Bob Van Voris.
(Updates with company comment in third paragraph. An earlier version corrected the agency acronym.)
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