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Indexing giant S&P Dow Jones Indices LLC settled allegations that it violated U.S. securities laws when an undisclosed index feature caused it to publish stale data during highly volatile markets.

The U.S. Securities and Exchange Commission (SEC) charged the firm over alleged failures involving a quality control feature of one of its volatility-related indices, the S&P 500 VIX Short Term Futures Index ER.

According to the SEC’s order, on Feb. 5, 2018, the VIX spiked by 115% but the index remained static due to an undisclosed “auto hold” feature, which is triggered if an index breaches certain thresholds.

This, in turn, affected an exchange-traded product that was based on the index, resulting in it reporting values that were “higher than they would have been if the auto hold had not been triggered,” the regulator said.

The SEC charged the firm with violating securities rules. S&P DJI agreed to settle the case without admitting or denying the SEC’s findings. It agreed to a cease-and-desist order and to pay a US$9 million penalty.

In a statement, S&P DJI said that it “takes these matters seriously and is committed to transparency and the integrity of its benchmark determination process.”

“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,” it added.

Daniel Michael, chief of the SEC enforcement division’s complex financial instruments unit, said index providers 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,” he said in a release.

However, SEC commissioner Hester Peirce issued a statement criticizing the enforcement action, arguing that it could set an unwelcome precedent for policing “all manner of actors and conduct with even more tenuous connections to the offer and sale of securities.”

Peirce said she did not support bringing the action, arguing that non-disclosure of the auto hold feature could have been a violation of a contract between S&P and the product issuer, but that it doesn’t represent a violation of securities law.

“The charges against S&P DJI suggest that any person who knows another party will use her product or service to build a security could be charged… for omissions or misstatements about that product or service,” she said in a statement.

“This enforcement action may hint at a deeper, unspoken concern that index providers, whose products have become so integral to our securities markets, are not governed by a regulatory framework explicitly tailored to their activities. I am open to exploring the need for and propriety of such a framework. An enforcement action, however, is not a substitute for doing the hard work to determine whether a regulatory framework for index providers is appropriate and, if so, what it should look like,” she added.