App Annie charged with securities fraud, agrees to pay $10m

Former CEO issued $300k penalty and a ban from serving as a company director over “engaging in deceptive practices”

Mobile analytics firm App Annie has agreed to pay $10 million to settle a securities fraud charge.

The charge was handed to the company by the US Securities and Exchange Commission (SEC) yesterday, which found App Annie to be in violation of the anti-fraud provisions of the Exchange Act, which makes it unlawful to issue misleading statements in connection with the sale or purchase of security.

The SEC's order states that the company was found "engaging in deceptive practices and making material misrepresentations about how App Annie's alternative data was derived."

The information App Annie collects -- such as download and revenue numbers -- is considered "alternative data" because it is not disclosed within the providing companies' financial statements.

The order also found that organisations only agreed to share their performance data with App Annie if it was first aggregated and anonymised, and not disclosed to third parties.

Between 2014 and 2018, App Annie used non-aggregated and non-anonymised data to make its estimates more valuable to trading firms, according to the SEC.

As per the order, App Annie was aware that trading firm customers were making investment decisions based on the firm's data, and that it also encouraged and shared ideas with said customers on how to use estimates to trade ahead of earnings reports. It also "touted how closely they correlated with the companies' true performance and stocks."

"App Annie sought to distinguish itself in the alternative data space by providing securities market participants with valuable information in a new and innovative way," said Erin E. Schneider, director of the SEC's San Francisco regional office.

"It went to great lengths to assure its customers that the financial and app-related data it sold was the product of a sophisticated statistical model and that it had controls to ensure compliance with the federal securities laws. These representations were materially false and misleading."

As well as the $10 million penalty issued to App Annie, co-founder, former CEO and chairman Betrand Schmitt is ordered to pay an additional penalty of $300,000, and is prohibited from serving as a director of office of a public company for three years.

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