DATA ANALYTICS

The advancement of computer software has made data analytics a very powerful enforcement tool for the SEC.  Being able to research and extract details from a massive amount of data, then sorting, comparing, and analyzing it provides the SEC with valuable details that were previously unavailable because of being buried in the masses of irrelevant data.  

In the SEC Speaks conference in Washington, DC on April 8 and 9, 2019, representatives of three SEC units in the Division of Enforcement reported on the enforcement success they are experiencing with the use of data analytics in different ways.

Data analytics specialists in the Complex Financial Instruments Unit can identify misconduct by “filter(ing) through an investment adviser’s data to identify clients over a certain age and with certain investment objectives who were sold complex investment products.”  It can also analyze “millions of rows of data in the blue sheets from EFTs to identify broker-dealers and registered investment advisers with clusters of unsuitable recommendations” and “identify suspicious trading patterns.”

Blue sheets are requests for information sent out by the Securities and Exchange Commission to market makers, brokers, and/or clearinghouses.  They provide the SEC with detailed information about trades performed by a firm and its clients. The information includes the security’s name, the date traded, price, transaction size, and a list of the parties involved.

The Market Abuse Unit uses data analysis tools in flexible ways, such as identifying patterns of “successful trades in advance of mergers” and identifying traders who traded on information obtained from hacking the SEC’s EDGAR filing system.

The “Retail Strategy Task Force uses data analytics to understand patterns within certain demographic groups (such as senior citizens) and to study how such groups are impacted by specific types of fraud. The Task Force sorts trading data by variables such as product, investor location, investor type, etc., to identify these patterns.”

The attorneys at Wilson, Bradshaw LLP are experienced in market requirements and can advise you about all proper securities procedures.  Whether minor violations are accidental or intentional, the SEC is constantly improving its ability to identify and prosecute them.