Citigroup unit to pay $5 million to settle SEC charges

Fri Jul 25, 2014 1:46pm EDT
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By Sarah N. Lynch and John McCrank

(Reuters) - A private trading venue owned by Citigroup (C.N: Quote) will pay a $5 million penalty to settle charges that it failed to protect customers' data, marking the latest case in a crackdown by U.S. regulators over alleged market rule violations.

The Securities and Exchange Commission said the unit, LavaFlow Inc., is settling the civil case without admitting or denying the charges.

The SEC said LavaFlow failed to put adequate safeguards and procedures in place to protect its subscribers' confidential trading information from March 2008 through March 2011.

As a result, another affiliate was then able to access the data and use it to help determine where to route certain orders, the SEC said.

A Citigroup spokesman said the bank is "pleased to put this matter behind us."

The charges against LavaFlow, which were filed on Friday, mark the fourth case since 2011 that the SEC has filed against an "alternative trading system" (ATS), a type of trading platform that competes with traditional exchanges.

Most recently, the SEC in June levied charges against another ATS operator called Liquidnet, also in connection with a breach of confidential subscriber data.

In that case, the SEC said Liquidnet used the private trading data of customers to market its services. Liquidnet settled the case and paid a $2 million penalty.   Continued...

People walk past a Citibank branch in New York October 15, 2013.  REUTERS/Andrew Kelly