Wolverine Trading, a broker-dealer and Wolverine Asset Management, an investment adviser, agreed to pay $1 million to settle the charges filed by the Securities and Exchange Commission (SEC).
According to the securities regulator, each of the firms agreed to pay penalties of $375,000, disgorgement of $364,145.80, and prejudgment interest of $39,158.47.
SEC allegations against Wolverine affiliates
Based on the SEC’s order instituting administrative proceedings, Wolverine Trading, and Wolverine Asset Management failed to maintain and enforce policies and procedures to prevent the misuse of nonpublic information.
The Commission found that both firms violated their policies and procedures by sharing information repeatedly in February to March 2012.
Wolverine Trading and Wolverine Asset Management shared their trading positions and strategies for the TVIX, an exchange-traded note that traded at a premium to its indicative value after new issuances of the note were suspended temporarily.
According to the SEC, the firms’ traders met and discussed issues regarding TVIX despite information barriers between the affiliates.
Additionally, they discussed details surrounding the potential reopenings of the new issuances of TVIX.On March 22, 2012, the price of TVIX noted declined prior to the issuer’s announcement regarding the reopening of issuances of the note, as ValueWalk reported at the time. The Commission noted that Wolverine Asset Management made profits that it should not have received from that market opportunity.
Wolverine affiliates have deficiencies in policies and procedures
“The federal securities laws require not only careful establishment of policies and procedures to prevent the misuse of material, nonpublic information, but also vigorous maintenance and enforcement of those policies and procedures,” according toMichae J. Osnato, Jr., chief of Complex Financial Instrument Unit, SEC Enforcement Division.
He added that broker-dealers and investment advisers like Wolverine Trading and Wolverine Asset Management failed to counteract the risk of misuse due to the absence of oversight and vigilance.
The SEC emphasized that the policies and procedures of the broker-dealer and investment adviser have deficiencies including vague provisions, inadequate guidance, and monitoring or surveillance of potential sharing of information.
Wolverine Trading and Wolverine Asset Management agreed to cease and desist from committing or causing any similar violations in the future and to be censured without admitting or denying the findings of the Commission.