Wolverine Affiliates Charged With Failing to Maintain Policies to Prevent Misuse of Material Nonpublic Information
The Chicago-based affiliates will pay more than \\$1 million to settle the SEC’s charges. Each agreed to pay penalties of \\$375,000, and Wolverine Asset Management will pay disgorgement of \\$364,145.80, plus prejudgment interest of \\$39,158.47.
According to the SEC’s order instituting administrative proceedings:
- From February to March 2012, Wolverine Trading, a broker-dealer, and Wolverine Asset Management, an investment adviser, repeatedly shared information in violation of their firms’ policies and procedures.
- The affiliates shared their trading positions and strategies for TVIX, an exchange-traded note whose market price traded at a premium to its indicative value after new issuances of the note were temporarily suspended. In addition, despite information barriers between the affiliates, traders from both affiliates met to discuss issues regarding TVIX. The affiliates also discussed details surrounding the potential reopening of new issuances of TVIX. Prices for the note fell on March 22, 2012 before its issuer announced the reopening of issuances of the note.
- Wolverine Asset Management subsequently profited from a market opportunity that it should not have received.
“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,” said Michael J. Osnato, Jr., Chief of the Enforcement Division’s Complex Financial Instruments Unit. “Without consistent oversight and vigilance, broker-dealers and investment advisers like Wolverine Trading and Wolverine Asset Management fail to counteract the ever-present risk of misuse.”
The order found that the affiliates violated the firms’ policies and procedures to prevent the misuse of material nonpublic information. The order also found that the information sharing exposed deficiencies in the firms’ policies and procedures, including vague provisions and inadequate guidance, monitoring, or surveillance of potential information sharing.
Without admitting or denying the findings, 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.
The SEC’s investigation was conducted by staff in the Enforcement Division’s Complex Financial Instruments Unit and New York Regional Office, including Joshua I. Brodsky, Howard Fischer, Elisabeth L. Goot, Kapil Agrawal, and Daniel Nigro. The case was supervised by Steven G. Rawlings. The Enforcement Division appreciates the assistance of staff from the SEC’s Office of Compliance Inspections and Examinations, including Daniel Gregus, Christine M. Sibille, Craig E. Carlson, Joshua Herbst, Michael E. Lockhart, Anna M. Mieszaniec, and Malinda Pileggi, and the SEC appreciates the assistance of the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority.