SEC announces end to S&P DJI investigation following $9m settlement

A regulatory investigation against S&P Dow Jones Indices LLC has concluded after the US Securities and Exchange Commission (SEC) completed their investigation resulting in a $9 million penalty. The SEC, which made the announcement yesterday, was investigating S&P Dow Jones Indices on grounds of being found pushing old index values when it came to the S&P 500 VIX Short Term Futures Index ER.

The regulatory order in question, which was detailed by the SEC, suggested that on 5th February 2018, the S&P 500 VIX Short Term Futures Index ER (Index) unlawfully published an old index value, during a time that saw a 115% spike in CBOE Volatility Index futures. On that day, the index was found to have remained completely immobile throughout particular intervals between 4 pm and 5:08 pm.


Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, Daniel Michael, said:

Daniel Michael, SEC

Daniel Michael
Source: LinkedIn

Index providers like S&P DJI play a crucial role in the financial markets. When index providers license their indices for the issuance of securities, as S&P DJI did here, they must ensure that the disclosure of critical features of their products as well as the publication of real-time values are accurate.

The SEC went on to make further specifications which suggested that the listing error was in fact due to an undisclosed ‘Auto Hold’ feature, which was set to be triggered if the value of the index breached a predetermined threshold. This undisclosed practice went on to affect the securities issuers who were responsible for licensing the index.

Though the company have agreed to the cease and desist order put forward by the SEC, it has reportedly chosen to neither deny nor admit to the allegations made by the US financial market regulator, but it did state that it cooperated fully in the investigation and is committed to a far more transparent benchmarking process in future.

S&P Dow Jones Indices stated that:

S&P DJI has reviewed its methodologies and its related policies and procedures as part of its index governance processes. The company continues to enhance and strengthen its control framework and operations to meet the needs of its clients and the evolving markets it serves.

SEC revealed yesterday it has awarded four whistleblowers with a total of over $31 million.

Following the Gamestop frenzy, earlier in May, SEC Chairman Gary Gensler revealed his thoughts surrounding online brokerages that dominate the execution of equity orders for retail investors. The Chairman stated that increasingly popular apps such as Robinhood’s strategically utilise game-like features in order to hook customers and keep them trading. Gensler emphasised that these sorts of issues are set to be a focal point when the regulator examines its rules.

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