Summarizing the lessons she learned from her tenure in a speech earlier this month, Mary Jo White, outgoing chair of the U.S. Securities and Exchange Commission (SEC), made a convincing case that the use of data analytics has greatly contributed to a dramatic rise in successful SEC investigations of insider trading and other securities fraud.
With the creation of the Center for Risk and Quantitative Analytics two years ago, the SEC was able to leverage the vast amount of securities data available to investigators to conduct thorough data analytics. During that brief time, the Center’s efforts were responsible for submitting “over 100 cases against more than 200 entities and individuals in matters involving insider trading, hedge funds, municipal issuers, and complex financial instruments, among others,” White said.
The SEC chair said that the commission’s investigators have access to “newly developed tools to analyze trading data, using the billions of lines of bluesheet trading data we now have in-house to build insider and abusive trading cases.”
At least nine insider trading cases originated solely from leads generated by these data analytics tools, according to White, with dozens of other cases benefiting from the ability to better identify unlawful trading. One of the more infamous cases involved dozens of hackers and traders who illegally made over $100 million by hacking into newswire services and leveraging the information found in pending corporate earnings announcements. The cases against these traders would not have happened without these new data analytic tools, White said.
Here at Cambridge Semantics, we understand how extremely difficult it can be to identify the potential for misuse of material non-public information. That’s why we’re huge proponents in the use of data analytics tools to identify and prosecute insider trading. We developed the Anzo Smart Data Lake platform in part to help firms in the financial services sector to effectively manage risk and compliance and catch wrongdoing early. The platform combines and links data from diverse sources, structure or unstructured, internal or external, into an integrated, interactive data environment that enables an investigative approach to uncovering insider trading and compliance violations.
To learn more about how the Anzo Smart Data Lake can identify potential violations of regulatory requirements as well as internal policies and procedures violations, download our whitepaper here.