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Market Intelligence Firm(s) Under Investigation by SEC | Dominos!

Last year, I wrote about the SEC action being enforced at that time against App Annie for the use of material, non-public information aka “MNPI”:

Click the image above to read the post. I highly recommend you read it to understand the nuances and potential implications of what happened.


  • As foreshadowed in that post from last year, I’m hearing that one or more market intelligence firms aka alternative data providers are currently under investigation by the SEC

This news represents the first domino to fall. I won’t name the companies specifically but it’s not App Annie and as I alluded to previously, this will now expand beyond them.

At the time I speculated that several repercussions could follow which I summarize below. Just to be clear, I’m not saying all of the dominos will fall, but of the potential dominos described from my previous post, most certainly domino #1 seems to be happening now.

Domino #1: Other Alternative Data Providers Get in Trouble

As foreshadowed in my post from last year, more actions seem to be coming against other data providers who may still be using MNPI to inform their data estimates. From my post last year:

There seems to be an implication here that other alternative data providers aren’t in compliance with their data.

This seemed to be the hint that App Annie itself was giving to the public from its website in the Trust & Assurance section.

As a reminder, MNPI refers to any information used that is not available to the public. Hence, public financial filings (e.g., 10Q, 10K, etc.) or information from company websites are ok. However, other sources of data are not allowed by the SEC. In App Annie’s case, they had to stop using data from public companies that were sending proprietary mobile app data via App Annie Connect.

The difficulty for alternative data providers moving into the future will be how capable they are of providing accurate estimations of mobile app data without relying on public company data. So any existing data relationships with EA, Zynga, Activision Blizzard, etc. would likely get scrutinized by the SEC.

Finally, SEC actions can be fairly significant. Note the SEC levied a $65M settlement against Robinhood. These actions after the App Annie action, which set the precedent, could be much higher. Whoever the SEC actions next could have an existential impact, especially on some of the smaller alternative data providers.

Domino #2: Customers of Compromised Alternative Data Providers Come Under SEC Scrutiny

In that post from last year, I also further speculated that there could be actions taken against customers of compromised alternative data providers:

Can I conceive of a world in which SEC enforcement actions are brought on public companies that conducted M&A transactions, launched a game, or created a new games division based on the use of an alternative data provider deemed by the SEC as “bad”?

As mentioned in the post from last year, Peter Greene, a lawyer for top-50 hedge funds stated the following:

You need to re-underwrite your alternative data provider… You need to ask that of other [alternative data providers] as well. That manipulation point is really, really important here… The next time the SEC brings one of these if they come to you and they say ‘Well did you ask if they were doing anything similar to what we found in that other case?’ And if you say ‘No’, the SEC is gonna say ‘Well we gave you the roadmap to do better diligence here. You didn’t do it. Now you know what? Now we’re not only gonna charge the app provider. Now we’re gonna charge you, because you buried your head in the sand.’

Hence, in my *speculation* I believe some customers may be at risk who have used compromised data for (from my last post):

  • Selecting what game markets to compete in and to greenlight game projects
  • M&A analysis
  • Corporate resourcing and organization (e.g., Netflix deciding to build out a games division)

The clear trend we are seeing right now, not just in gaming, but in broader tech is expanding government scope. Hence, it’s not just the SEC expanding its scope but more generally. Another good example is the Federal Trade Commission headed by Lina Kahn as well.

Hence, while speculative, this domino and the next domino would not surprise me if they were to also fall.

Note also, that in this new age, it’s not just companies at risk but the SEC can and will go after specific executives. We have seen this before with actions against executives including search and seizure as well as individual fines.

Take it from me, big-time execs will not take personal risks unless it involves significant personal gain for themselves. I know a bunch of them and I used to be one of them. Who’s now going to sign their name to the contract that gives explicit consent to an alternative data provider in the current environment?

By the way, it’s not just hedge funds trading using market intelligence data using MNPI. We likely all know of some folks who have used this data personally to trade.

The SEC has been pretty clear that this also will violate SEC rules.

You have been warned!

Domino #3: Vertically Integrated Ad Networks + Game Content Companies Come Under SEC Investigation

The final domino has to do with vertically integrated gaming companies like Zynga, Applovin, and Ironsource. As per that post from last year:

What about public companies that are using access to data from vertically integrated ad networks (aka MNPI) to inform product strategy?

The same rules for using MNPI apply here.

Again it is not ok to use MNPI data for applications such as:

  • Selecting what game markets to compete in and to greenlight game projects
  • M&A analysis
  • Corporate resourcing and organization (e.g., Netflix deciding to build out a games division)

The owners of ad networks have access to incredibly sensitive and valuable data: creatives/creative performance, bid/budget data, etc.

We have seen this data collected from ad networks used against game studio customers time and time again over the past few years without repercussions. While highly speculative and hard to prove, this time, however, the trends from what we’re seeing with the SEC expansion may suggest this final domino is also possible.

Conclusion & Key Take-aways

In conclusion, we seem to be in the second phase of an expanded SEC regulatory regime targeting MNPI being used in the gaming industry.

  • First Phase: In the first phase, App Annie was targeted by the SEC and was forced to modify its business practices and invest in non-MNPI methodologies to create accurate app data estimates.
  • Second Phase: We are now in a second phase in which the first domino seems to be falling now. The SEC will likely take actions against alternative data providers who are using MNPI against SEC guidelines.
  • Following Phases: While speculative, the 2nd and 3rd dominos are potential scenarios depending on just how aggressive the SEC becomes.

What This Means For You!

The key take-aways for you should be as follows:

  1. Please do not trade using market intelligence data unless you are sure your provider is MNPI compliant.
  2. If you or your company is using market intelligence for some of the applications I described, be sure your provider is compliant with SEC guidelines on MNPI.
  3. If you are a vertically integrated game studio + ad network… well, you’ve been warned!

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