In a speech yesterday at the SIFMA Compliance & Legal Conference, SEC Chair Mary Shapiro offered some interesting insights into the agency’s efforts to improve its use of technology in the enforcement area. She offered several examples of how new technology was enabling the SEC to work smarter and bring cases it might not have been able to bring in years past. Notable examples include:
“Aberrational Performance” inquiries concerning hedge funds. In December 2011, the SEC brought actions against four hedge fund advisers identified through the “aberrational performance inquiry for inflating returns, overvaluing assets and other actions that materially misled and harmed investors.” This type of inquiry uses quantitative analytics combined with qualitative review to identify hedge funds that merit additional scrutiny. As previously discussed here, these inquiries into funds with “outlier” returns are led by the Enforcement Division’s Asset Management Unit. The goal is to achieve earlier detection and prevention of problems, even in the absence of a tip or complaint.
