UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940

Release No. 4780 / September 28, 2017

ADMINISTRATIVE PROCEEDING

File No. 3-18234

In the Matter of

SIX FINANCIAL 

INFORMATION USA INC., 

Respondent.

ORDER INSTITUTING CEASE-ANDDESIST PROCEEDINGS PURSUANT TO 

SECTION 203(k) OF THE INVESTMENT 

ADVISERS ACT OF 1940, MAKING 

FINDINGS, AND IMPOSING REMEDIAL 

SANCTIONS AND A CEASE-ANDDESIST ORDER

I .

The Securities and Exchange Commission (“Commission”) deems it appropriate 

and in the public interest that public cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Section 203(k) of the Investment Advisers Act of 1940 (“Advisers 

Act”) against SIX Financial Information USA Inc. (“SFI” or “Respondent”).

II.

In anticipation of the institution of these proceedings, Respondent has submitted an 

Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely 

for the purpose of these proceedings and any other proceedings brought by or on behalf of 

the Commission, or to which the Commission is a party, and without admitting or denying 

the findings herein, except as to the Commission’s jurisdiction over it and the subject matter 

of these proceedings, which are admitted, Respondent consents to the entry of this Order 
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Instituting Cease-and-Desist Proceedings Pursuant to Section 203(k) of the Investment 

Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-andDesist Order (“Order”), as set forth below.

III.

On the basis of this Order and Respondent’s Offer, the Commission finds1that:

Summary

1. These proceedings arise from misconduct by SFI, an outside valuation agent, in providing 

valuation services to an investment firm concerning the value of four complex European options 

held by several series of a managed futures fund. Specifically, an SFI valuation expert represented 

to a client, the investment firm, that SFI was providing an independent valuation of the European 

options at fair value by using a proprietary Black-Scholes-based model. In reality, the SFI 

valuation expert did not perform an independent valuation of the European options, nor did he use 

a Black-Scholes-based model to determine fair value. Instead, he calculated a valuation range for 

the European options by making purported liquidity adjustments to valuations provided by the

investment firm. As a result, SFI misled the investment firm as to the type of valuation work it had 

performed.

Respondent

2. SIX Financial Information USA Inc. (“SFI”), a corporation headquartered in Stamford, 

Connecticut, provides financial information for portfolio management, financial analysis, 

investment advisory services, and securities administration. In approximately April 2010, SFI 

acquired the assets of a small valuation company that specialized in valuing complex or illiquid 

securities, and SFI began offering third-party pricing services for complex or illiquid securities to its 

clients. SFI is not registered as an investment adviser with the Commission. 

Other Relevant Entities

3. “Managed Futures Fund” (“MFF”), a Delaware statutory trust, is a publicly registered 

managed futures fund. MFF operates as a series trust, with numerous series engaged in separate 

trading strategies. The assets of each MFF series are valued and accounted for separately, and each 

series strikes a daily net asset value (“NAV”). Each MFF series registered the offering of its units 

under the Securities Act of 1933. 

 

1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other 

person or entity in this or any other proceeding.
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4. “Investment Firm” is an asset management firm that specializes in managed futures. 

Investment Firm is registered as an investment adviser with the Commission and as a commodity 

pool operator with the U.S. Commodity Futures Trading Commission. Investment Firm serves as 

MFF’s commodity pool operator and managing owner. Investment Firm is responsible for the 

preparation and filing of MFF’s financial statements and periodic filings.

Facts

Background 

5. From approximately October 2007 through May 2009, four MFF series began investing in 

separate European OTC call options (the “European Options”). The reference assets of the 

respective European Options were one or more private managed futures funds. By year-end 2010, 

four MFF series had invested a total of approximately $84 million of cash in the European Options.

6. Investment Firm was responsible for the daily calculations of each MFF series’ NAV, 

and therefore was responsible for determining the valuation of all investments held by each 

MFF series. The European Options did not have readily determinable fair values because they 

were not traded on an open market and did not have publicly reported prices. From the 

respective dates of purchase through the third quarter of 2010, Investment Firm valued the 

European Options using an internal valuation methodology. During 2010, MFF’s auditors 

recommended that Investment Firm engage a third-party valuation agent to independently 

value the European Options and incorporate that information into its valuation process.

Investment Firm Sought an Independent Valuation of the European Options from SFI

7. In October 2010, Investment Firm contracted with a data and valuation firm (“Data 

Firm”) to obtain daily valuations for the European Options. Investment Firm’s contract with 

Data Firm indicated that the valuation services would be provided by SFI, and Data Firm in turn 

contracted with SFI to perform all of the work to produce daily valuations. SFI received 65% of 

the fees that Investment Firm paid to Data Firm.

8. Data Firm functioned as an intermediary in transmitting SFI’s daily valuations for the 

European Options to Investment Firm, and in facilitating communications between Investment 

Firm and SFI. Investment Firm’s understanding was that SFI was performing independent 

valuations of the European Options.

9. SFI had started offering valuation services for complex or illiquid securities in 2010 

following its acquisition of the assets of a small valuation firm that specialized in valuing 

complex or illiquid securities. SFI called this new unit the Evaluated Pricing Group (the “EP 

Group”). SFI hired a relatively small group of valuation professionals to work in the EP Group. 

SFI also entered into a consulting agreement with the former president and owner of the small 

valuation firm to function as SFI’s initial valuation expert (the “Valuation Expert”) and to head 

the new EP Group. In that role, Valuation Expert determined what valuation models should be 
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used for many valuation assignments, handled questions about models and valuation challenges, 

developed new models, and functioned as part of the EP Group management team. 

SFI Acted as an Investment Adviser

10. With respect to the valuation of the European Options, SFI acted as an investment 

adviser under Section 202(a)(11) of the Advisers Act because it was engaged in the business of 

advising others as to the value of securities for compensation. Specifically, SFI provided advice 

to Investment Firm about the value of securities (the European Options) in exchange for 

compensation by the Data Firm.

11. SFI was responsible for completing each of the steps necessary to value the European 

Options. Among other things, the Valuation Expert (with assistance from various SFI 

employees): determined the valuation methodology; developed valuation model templates; 

determined the sources for inputs into the models; operated the model templates to generate 

daily valuations; made professional judgments about whether the valuations generated by the 

model templates were appropriate or required further adjustment; created a daily report that 

summarized the upper, lower, and median valuation for each European Option; transmitted the 

daily valuation report to the Data Firm (who in turn transmitted it to Investment Firm); 

answered questions from Investment Firm and MFF’s auditor about the valuations and 

methodologies used; and resolved pricing challenges from Investment Firm.

SFI Misled Investment Firm That It Was Independently Valuing the European Options 

Using a Modified Black-Scholes Model

12. The Valuation Expert had primary responsibility for discussions with Investment Firm

concerning how SFI planned to value the European Options and acknowledged in emails that he 

understood that Investment Firm was seeking an independent valuation.

13. Investment Firm provided SFI with weekly price reports for the underlying reference 

assets for the European Options because that information was not generally available in the 

market. At the request of the Valuation Expert, Investment Firm also sent SFI its daily internallydeveloped valuations of the European Options. The Valuation Expert represented that SFI sought 

Investment Firm’s valuations of the European Options for use as a “cross-check” to SFI’s 

valuations. 

14. In October 2010, SFI began producing daily valuation reports for Investment Firm that 

provided an upper bound, lower bound, and median valuation for each of the European Options. 

In those reports, SFI indicated that a basket option model was being used that incorporated 

appropriate adjustments to determine the current market value of the European Options. Based 

upon these valuation reports and their course of dealings, Investment Firm believed that SFI was 

using an appropriate model to independently value the European Options at fair value.
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15. In late 2010, the Valuation Expert also sent academic papers to Investment Firm and 

MFF’s auditor, which he explained were related to the methodology being used to value the 

European Options. The papers were complex and the Valuation Expert did not identify the 

specific methodology being used to value the European Options. Based upon their receipt of these 

academic papers and other materials, Investment Firm’s personnel believed that SFI had the 

technical expertise and experience necessary to independently value the European Options, and 

that SFI was using a complex, proprietary model to value the European Options.

16. In January 2011, MFF’s auditor asked the Valuation Expert for a detailed explanation of 

the model used to value the European Options. In response, the Valuation Expert represented in a 

February 2011 email provided to Investment Firm and MFF’s auditor that a modified BlackScholes model was being used to value the European Options. The Valuation Expert further 

explained that the volatility component in the model was derived from a combination of implied 

and historical values, and that the “implied values are taken from observed exchange-traded 

options where practicable and historical values are calculated using observed market data points 

for appropriate underlyings.”

17. Beginning in late December 2010, Investment Firm began using the median valuation 

from SFI to price the European Options on a daily basis to strike the NAV of the respective MFF 

series that held those investments. Investment Firm continued to use SFI’s valuation to price the 

European Options until August 2011, when Investment Firm changed its valuation methodology 

and began using the counterparty’s valuations. However, Investment Firm continued to use SFI’s 

valuations to corroborate the counterparty’s valuations while the respective European Options 

were held by the various MFF series.

SFI’s Valuation Expert Did Not Independently Value the European Options Using a 

Modified Black-Scholes Model

18. Contrary to the Valuation Expert’s statements, SFI was not performing an independent 

valuation of the European Options. Instead, the Valuation Expert’s model template merely used 

Investment Firm’s estimated valuation of the respective European Options, and then applied a 

relatively simple formula to calculate an upper bound, lower bound, and median valuation range 

around Investment Firm’s valuations. As a result, the valuation ranges SFI provided to 

Investment Firm were completely derivative of Investment Firm’s valuations, and therefore did 

not constitute independent valuations. 

19. Moreover, the Valuation Expert did not use a Black-Scholes-based model to value the 

European Options. Among other things, the model did not include numerous standard BlackScholes model inputs, including: (a) the underlying prices of the respective reference assets; (b) 

the European Options’ strike prices; (c) the time to expiration of the European Options; (d) 

volatility; or (e) an applicable risk-free interest rate. Furthermore, even if the model templates had 

incorporated some measure of volatility, there is no evidence that implied volatility numbers were 

taken from “observed exchange-traded options” or that historical values were “calculated using 

observed market data points for appropriate underlyings.”
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20. Based on the foregoing, SFI made materially misleading statements to Investment Firm 

regarding the valuations SFI was providing of the European Options.

21. In May 2012, SFI terminated its consulting agreement with the Valuation Expert and 

transferred his responsibilities to other personnel. 

Violations

22. Section 206(2) of the Advisers Act prohibits investment advisers from directly or indirectly 

engaging “in any transaction, practice, or course of business which operates as a fraud or deceit 

upon any client or prospective client.” As a result of the conduct described above, SFI violated 

Section 206(2) of the Advisers Act. A violation of Section 206(2) does not require a showing of 

scienter but “may rest on a finding of simple negligence.” SEC v. Steadman, 967 F.2d 636, 643 

n.5 (D.C. Cir. 1992) (citing SEC v Capital Gains Research Bureau, Inc., 375 U.S. 180, 191 (1963)). 

IV.

In view of the foregoing, the Commission deems it appropriate and in the public 

interest to impose the sanctions agreed to in Respondent’s Offer.

Accordingly, pursuant to Section 203(k) of the Advisers Act, it is hereby 

ORDERED that:

A. Respondent cease and desist from committing or causing any violations 

and any future violations of Section 206(2) of the Advisers Act.

B. Respondent shall pay disgorgement of $27,411, prejudgment interest of 

$5,296, and a civil penalty of $75,000 to the Securities and Exchange Commission within 

30 days from the date of entry of this Order. If any payment is not made by the date the 

payment is required by this Order, the entire outstanding balance of $107,707, plus any 

additional interest accrued pursuant to SEC Rule of Practice 600 and/or pursuant to 31 

U.S.C. 3717, shall be due and payable immediately, without further application. 

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request; 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 
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(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

SFI as a Respondent in these proceedings, and the file number of these proceedings; a copy 

of the cover letter and check or money order must be sent to Jason Burt, Assistant Regional 

Director, Asset Management Unit, Division of Enforcement, Denver Regional Office, U.S. 

Securities and Exchange Commission, Bryon G. Rogers Federal Building, 1961 Stout Street, 

Suite 1700, Denver, CO 80294. 

C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair 

Fund is created for the disgorgement, prejudgment interest, and penalty referenced in paragraph 

B above. Regardless of whether such a Fair Fund distribution is made, the amount ordered to be 

paid as a civil money penalty pursuant to this Order shall be treated as penalty paid to the 

government for all purposes, including all tax purposes. To preserve the deterrent effect of the 

civil penalty, Respondent agrees that in any Related Investor Action, it shall not argue that it is 

entitled to, nor shall it benefit by, offset or reduction of any award of compensatory damages by 

the amount of any part of Respondent’s payment of a civil penalty in this action (“Penalty 

Offset”). If the court in any Related Investor Action grants such a Penalty Offset, Respondent 

agrees that it shall, within 30 days after entry of a final order granting the Penalty Offset, notify 

the Commission's counsel in this action and pay the amount of the Penalty Offset to the 

Securities and Exchange Commission. Such a payment shall not be deemed an additional civil 

penalty and shall not be deemed to change the amount of the civil penalty imposed in this 

proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding.

D. After receipt of the disgorgement, interest, and penalty referenced in paragraph B 

above, the Commission shall, within 90 days, make a payment of $43,330 (the fees paid to Data 

Firm in the amount of $42,170 plus interest in the amount of $1,160, calculated at the Federal 

short-term rate) to Investment Firm. The Commission staff will seek the appointment of a tax 

administrator in regard to the payment to Investment Firm as it constitutes a payment from a 

qualified settlement fund (“QSF”) under section of 468B(g) of the Internal Revenue Code (IRC), 

26 U.S.C. Section 468B(g), and related regulations, 26 C.F.R Sections 1.468B-1 through 1.468B5. Taxes, if any, and related administrative expenses shall be paid from funds remaining after the 
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payment has been made to Investment Firm. After the distribution payment and all taxes and 

administrative expenses are paid, the Commission staff will transfer the remaining funds to the 

general fund of the United States Treasury subject to Exchange Act Section 21F(g)(3). 

By the Commission.

Brent J. Fields 

Secretary