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New Fiscal Year Will Bring More Advisor Cases: SEC Enforcement Chief

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Andrew Ceresney, the Securities and Exchange Commission’s enforcement chief, said Tuesday that the agency will continue to bring cases in the new fiscal year against investment advisors in numerous areas — including regarding their misrepresentation of investment objectives, undisclosed conflicts of interest, adequacy of compliance programs, performance advertising as well as investment advisor fees.

Noting that the agency had a “banner” year in enforcement actions during the last fiscal year, which closed Oct. 1, Ceresney said during Securities Docket’s Securities Enforcement Forum in Washington that the agency brought enforcement actions “across a broad spectrum” of cases such as insider trading and financial fraud, as well as advisor and muni fraud.  

He also listed the “long list” of “first-ever” cases the agency brought in the past year, which included the market access rule violation case against Wedbush Securities, the whistleblower retaliation case against Paradigm Capital, as well as the first investment advisor pay-to-play rule violation.

Ceresney noted insider trading will continue to be a “major focus” for the agency and that his division will also focus in the next fiscal year on private equity fees and expenses and has “upped its focus” on microcap fraud and pyramid schemes.

Ceresney noted that the agency brought “twice as many trials” in 2014 as in 2013 and “performed incredibly well in those.” Also, he said, the agency used “big data in ways we hadn’t before” to investigate misconduct and bring cases the agency once could not. The agency also showed that it “could get admissions” of guilt in certain cases.

As to the enforcement division’s use of big data, Ceresney said that the agency has “access to data that we didn’t have access to five to 10 years ago,” such as evaluating patterns in blue sheet data regarding trading.

“We have billions of lines of blue sheet data to take advantage of and find [trading] patterns,” he said.

Also, he said, the agency’s Office of Compliance Inspections and Examinations’ team in Salt Lake City uses big data to evaluate broker-dealers’ clearing data to catch sales of unsuitable investments.

Check out Facing No Urgent Crises, SEC ‘Spreads Its Wings’ on ThinkAdvisor.


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