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SEC office to shepherd risk analysis tool development

The Securities and Exchange Commission plans to open an office to help develop data analytics tools that can identify and track investment and management risk among the financial institutions it regulates.

The office will operate within the agency’s Division of Economic and Risk Analysis (DERA) to coordinate efforts to create “data-driven risk assessment tools and models” to support its regulatory activities, the SEC announced.

DERA has produced a number of risk assessment tools since it was created in 2009.  That year it developed the Aberrational Performance Inquiry tool, designed to seek out and flag atypical hedge fund performance, according to the commission. It has been used by SEC’s enforcement division to assess private funds, leading to eight enforcement actions, according to the SEC.

DERA has also developed a risk assessment tool that helps SEC allocate resources by measuring a broker-dealer’s comparative riskiness relative to its peer group. 

The division is also working with SEC’s Enforcement Division’s financial reporting and audit task force and the Division of Corporation Finance on a tool to help spot financial reporting irregularities that may signal fraud.

“The Office of Risk Assessment will build on the existing expertise of DERA’s staff, which includes economists, accountants, analysts and attorneys, to provide sophisticated assessments of market risks,” said DERA Deputy Director Scott W. Bauguess, who oversees the division’s risk assessment projects.

“The establishment of this new office reflects the Commission’s ongoing focus on deploying data-driven analytics to assist in routing scarce resources to areas of the greatest risks to the market,” he added.

Posted by GCN Staff on Sep 19, 2014 at 9:48 AM


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