5 Things Investment Advisers Need to Know about Regulatory Investment in Trade Surveillance

September 20, 2017

ACA Compliance Group recently hosted the webcast briefing Regulatory Investment in Trade Surveillance – What You Should Know. Kenny Clowers, Managing Director at ACA Compliance Group, and Farid Razzak, Data Science and Analytics Engineer at ACA Surveillance Technology, discussed how the SEC's ongoing commitment to developing its technological capabilities for detecting financial crimes is impacting investment advisers across the industry.

Here are 5 key takeaways from the webcast that your firm needs to know. 

  1. The SEC continues to invest in analytics resources, high-tech employees, and R&D.
    The SEC now has the tools and personnel to process trade data – and more of it – faster and more efficiently than ever before. The SEC's Quantitative Analytics Unit, which develops the National Exam Analytics Tool ("NEAT"), includes specialists with backgrounds in computer science, data science, financial engineering, and mathematics.
     
  2. The SEC is taking a more risk-based approach to investment adviser exams.
    With NEAT, SEC staff can more quickly and easily share observations and unique data points from examinations internally, allowing them to identify operational red flags across the investment adviser industry.
     
  3. SEC staff are becoming more knowledgeable about portfolio management decision-making and trade execution – and about your firm.
    This means more sophisticated technical questions as part of exams, which may save everyone time – or lead to some surprises if your firm is not prepared.
     
  4. The SEC has significantly revamped its trade blotter requests.
    ACA has observed more expansive and detailed trade blotter requests during exams. Recent requests involve more than 40 fields – compared to the 13-14 used for the last 15-20 years – and may ask for up to five years of trading history.
       

The SEC has shown an increased interest in firms' trade surveillance, monitoring, and forensic testing activities.
ACA has seen exam requests for investment advisers' records regarding their trade surveillance activities, including the surveillance system used, compliance calendars, and records of chaperoning or other compliance oversight. We have also observed a focus on monitoring and forensic testing during and after expert meetings and meetings with issuers.

How ACA Can Help

ACA Compliance Group offers several solutions that can help your firm prepare for an SEC examination and the SEC's focus on trade data, including:

  • Mock SEC examinations supplemented with Decryptex, ACA's trade surveillance software – This service is designed to take you through the steps of an SEC examination that includes trade surveillance requests.
  • Decryptex "swipe" plus ACA consult – We use Decryptex to analyze a sample of your trade data from a specific time period using an examiner's perspective.

For More Information

For more information, please contact Mike Lehman at ACA Technology or your regular ACA consultant.