SEC Orders Virtu to Pay $1.5 Million Penalty for Violations of Regulation SCI
Sept. 30, 2019
File No. 3-18563
September 30, 2019 - The Securities and Exchange Commission today announced that Virtu Americas LLC (f/k/a KCG Americas LLC) agreed to pay $1.5 million to settle charges for failing to comply with Regulation SCI. The Commission adopted Regulation SCI to strengthen the technology infrastructure and integrity of the U.S. securities markets.
According to the SEC's order, KCG Americas operated an alternative trading system, or ATS, commonly referred to as a "dark pool." An ATS that exceeds certain trading volume thresholds is required to comply with Regulation SCI. The SEC order finds that KCG Americas implemented an automated system that was intended to keep its dark pool's trading volume below the volume thresholds by discontinuing trading in particular securities before the thresholds were met. KCG Americas relied on this system for more than a year and half. However, according to the SEC's order, the system did not function as intended, causing trading to exceed the thresholds that triggered the need to comply with Regulation SCI. Despite being subject to Regulation SCI, the firm failed to comply with various provisions of Regulation SCI from November 2015 through April 2017. Specifically, the SEC's order finds that KCG America did not: (a) establish the policies and procedures required by Regulation SCI; (b) file any quarterly or annual reports required by Regulation SCI; (c) conduct an annual Regulation SCI compliance review; (d) comply with various business continuity and disaster recovery plan requirements of Regulation SCI; or (e) maintain the books and records required by Regulation SCI.
The SEC's order finds that Virtu willfully violated the policy and procedure, reporting and recordkeeping provisions of Rules 1001, 1003, 1004, and 1005 of Regulation SCI, promulgated under the Securities Exchange Act of 1934. Without admitting or denying the SEC's findings, Virtu consented to the entry of a cease and desist order and agreed to be censured and to pay a penalty $1.5 million.
The SEC's investigation was conducted by Andrew R. McFall of the Cyber Unit and the Chicago Regional Office and Mandy Sturmfelz of the Market Abuse Unit. The investigation was supervised by Joseph G. Sansone, Chief of the Market Abuse Unit, Kathryn A. Pyszka, Associate Director of the Chicago Regional Office, and Amy Flaherty Hartman, Assistant Regional Director of the Chicago Regional Office. The Office of Compliance Inspections and Examinations Technology Controls Program conducted the examination that led to the investigation. The examination team included Lisa Robinson, Scott Aryan, Ann Moles and Rich Hannibal.