March 19, 2014

Kay Gordon and Mary Hansen Quoted in Compliance Intelligence

New York partner Kay Gordon and Philadelphia partner Mary Hansen were quoted in Compliance Intelligence in an article on the Office of Compliance Inspections and Examinations amping up exam data analytics.

The Securities and Exchange Commission examiners are poised to start implementing a "revolutionary" National Exam Analytics Tool (NEAT) that will allow inspectors to process large amounts of firms’ data quickly and generate reports on possible violations.

Rather than looking at a few days or weeks of trading data, as has been typical of SEC exams until now, the program will collect many years’ worth of trading information. Using the tool, which the quantitative team had built in-house, examiners will be able to analyze transactions over multiple years to catch violations such as insider trading, Regulation M violations and front-running. The program would be fairly inexpensive to operate as it pulled information from publicly available databases.

NEAT will allow inspectors to generate profit-and-loss reports, trade allocation reports, insider trading analysis, and will provide interactive visualization. The tool will enable an inspector at the push of a button to determine which of a firm’s trades were the most profitable and which accounts have performed the best, thus enabling examiners to focus their questions in those areas.

“Hopefully it will streamline the exam process, with the SEC focusing on certain issues as a result of this tool, such as insider trading or accounting issues, where the use of data could be particularly helpful,” said Kay.

Kay continued, "The fear is that it’s going to penalize people who exhibit very strong performance that stands out, and which the SEC in running its searches will view as abnormal returns."

“Given that they’re out there touting that they have this tool, I wouldn’t be surprised to see future enforcement actions in which they mention that they used it in bringing cases," Mary commented.


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