Earlier this week on his Cady Bar the Door blog, David Smyth wrote about one of the things that caught his attention at the recent SEC Speaks conference. The SEC's Rob Cohen, co-chief of the Market Abuse Unit, stated at the conference that the Market Abuse Unit has now filed five insider trading cases generated from the Enforcement Division's "Analysis and Detection Center" over the last year. Smyth wrote:
This is noteworthy. Here is one of the cases, and here is another one. Lexis doesn’t tell me about the other two. But what I want to know is, what data do they have? Where are they getting it? How are they using it? Would they have been able to do these cases without the Center? Is the Center a place or just software? I want it to be a room with a thermometer-like meter in the corner that lights up in a different color at the top, for the craziest insider trading schemes or the most money at stake. I also want a snoozing SEC staff attorney to be startled awake while spilling coffee when the “thermometer” hits Defcon 1....
Lots of important questions here, but don't worry, David, because Enforcement Action is on the case!
To answer some of these questions, I reached out to Dan Hawke, a partner at Arnold & Porter who until August 2015 was the chief of the Market Abuse Unit at the SEC. During his 16-year tenure at the SEC, Hawke led the establishment of the Analysis and Detection Center, so he knows quite a bit about it.
For starters, there is no physical location for the "Center." Rather, the A&D Center refers to the virtual organization of the 10-person staff who work closely together across approximately four different offices.
The A&D Center, Hawke said, exists within the Market Abuse Unit and was created to generate leads for the Enforcement DIvision and provide analysis and industry expertise. To carry that out, the Center is staffed with 10 industry specialists who report to the chief of the Market Abuse Unit.
When Hawke and the Market Abuse Unit were hiring these specialists, they asked candidates an interesting question: "If you wanted to engage in insider trading and avoid SEC surveillance, how would you do it?" Hawke said the answers they received were fascinating and very useful in their efforts to hire insightful staff for the A&D Center, The 10-person staff includes quantitative analysts; an ex-FBI agent; an accounting investigator; specialists in high frequency trading, trading strategies, and market structure; and one investigative counsel.
The A&D Center processes and analyzes massive amounts of "bluesheet data" to help the SEC find patterns and relationships that link traders in insider trading cases. Although the SEC's Cohen reportedly stated that the A&D Center has generated five insider trading cases over the last year, I could only find four cases in which the SEC explicitly credited the A&D Center in its announcement of the case:
SEC v. Aggarwal, et al.
SEC v. Spallina, et al.
SEC v. Condon, et al.
SEC v. Han
Does anyone out there know of a 5th case where the SEC cited the help of the A&D Center in its press release? If so, please send it along.