Last week, the SEC filed a headline-generating case against a former analyst with J.P. Morgan, claiming that the analyst tipped his friend with inside information about upcoming mergers and acquisitions of technology companies. The SEC alleged that the analyst, Ashish Aggarwal, his friend and another individual combined to make over $672,000 trading on the inside information.

In its Litigation Release announcing the case, the SEC included an interesting note that the Enforcement Division's Market Abuse Unit was able to detect the insider trading "through trading data analysis tools in its Analysis and Detection Center." As far as I can tell by searching the SEC website, this is the first time that an SEC press release or litigation release announcing an enforcement action has credited the Analysis and Detection Center.

 

The SEC has mentioned the Analysis and Detection Center occasionally in the past. In 2010, both Chairman Mary Schapiro and Enforcement Director Rob Khuzami stated in Congressional testimony that such a Center was being planned. In December 2010, Schapiro testified that the Market Abuse Unit:

 

is planning an Analysis and Detection Center, to be staffed, budget permitting, with specialists having expertise in algorithmic trading strategies, trading abuse, quantitative analysis, market structure and data architecture. By concentrating expertise in these areas, the Division of Enforcement can more efficiently and effectively identify potentially abusive trading practices that pose the greatest risk of harm to investors.

As recently as its FY 2014 Budget Request, however, the SEC was still referring to the "Analysis and Detection Center" as a future initiative, saying that

This Center will be staffed by specialists with comprehensive trading and quantitative expertise to identify potentially abusive trading practices in order to assist staff attorneys conducting investigations into complex trading schemes.

The Analysis and Detection Center definitely seems to be in place now, however. In a July 29, 2015 press release noting the departure of Daniel M. Hawke, chief of the Market Abuse Unit and former Director of the Philadelphia Regional Office, the SEC noted that Hawke "led the establishment of the unit’s Analysis and Detection Center to identify and evaluate potential violations of the federal securities laws."

 

The Aggarwal case may not be the first to have been found through the SEC's Analysis and Detection Center but it is the most prominent example I've seen to date. I will try to track down some additional details on the Analysis and Detection Center and will post them here if I am successful.

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