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SEC's Philly Office Takes New Angle on Market Abuse

Bruce Carton | February 19, 2010

Matthew Goldstein of Reuters has an interesting article out today profiling Dan Hawke and the SEC's resurgent Philadelphia office. The Philadelphia office--which Goldstein notes "sits atop an upscale shopping mall in downtown Philadelphia"--is now Ground Zero for the SEC's new effort against market abuse. On January 13, 2010, Hawke was named as Chief of the SEC's Market Abuse unit.

Hawke says that the focus of his group is "trader-based," and not simply "securities-based." By this he means that his team uses computers to take personal information about individual traders, such as where they went to school or where they used to work, and cross-check it against trading data on dozens of stocks. This is a variation on the SEC's typical practice of pursuing a case only after learning of unusual activity in the trading of some security.

(Goldstein then quotes some dude named Bruce Carton, who says that "A decade ago there wasn't a whole lot of computer assistance when it came to matching up names or matching up employers. That's extremely helpful.")

Hawke's new Market Abuse unit will be staffed by SEC lawyers in numerous offices, and he has already named a deputy, Sanjay Wadhwa, who is an assistant regional director in the New York office.

The article also reminded me that Hawke was one of the SEC lawyers who helped uncover the "Estonian Spider Hackers," two employees of an Estonian financial services firm who made nearly $8 million in insider trading profits by using a "spider" program to hack into Business Wire's secure client website. Once they hacked into the website, they had access to confidential information in impending nonpublic press releases, including news involving mergers, earnings, and regulatory actions. Their scheme, which even Hawke had to admit was "clever and pernicious," earned them a place in December 2008 on Securities Docket's "Mount Rushmore of Securities Fraud."