Reg­u­la­tors em­ploy­ing tech tools to speed up se­cu­ri­ties probes


TORONTO Se­cu­ri­ties reg­u­la­tors say they are in­creas­ingly em­ploy­ing data an­a­lyt­ics and other so­phis­ti­cated tools to track down fi­nan­cial mis­cre­ants faster, but these tech­nolo­gies won’t be able to fully re­place hu­man judg­ment.

The direc­tor of en­force­ment at the On­tario Se­cu­ri­ties Com­mis­sion said Thurs­day that they need these tools to crunch the “mind­numb­ing vol­ume of data” the reg­u­la­tor takes in for in­ves­ti­ga­tions, and do it in weeks, not years.

Jeff Ke­hoe said dur­ing a panel dis­cus­sion in Toronto that reg­u­la­tors can no longer use tra­di­tional tools and in­ves­ti­ga­tion tech­niques in the “new world for us,” with ad­vances such as cryp­tocur­ren­cies and high-fre­quency trad­ing.

“It’s like find­ing a nee­dle in 50 haystacks, or 100 haystacks,” he said. “And so we need tools that not only re­duce the size of the haystacks but make the nee­dles big­ger.”

Reg­u­la­tors in re­cent years have put out guid­ance on the se­cu­ri­ties im­pli­ca­tions of blockchain, cryp­tocur­ren­cies and ini­tial coin of­fer­ings as the us­age of these tech­no­log­i­cal in­no­va­tions pro­lif­er­ate.

Reg­u­la­tors say they too are ap­ply­ing tech­no­log­i­cal tools to their en­force­ment tasks, as the vol­ume of data grows ex­po­nen­tially.

The mon­e­tary au­thor­ity of Sin­ga­pore’s ex­ec­u­tive direc­tor of en­force­ment Gil­lian Tan said dur­ing the OSC event on Thurs­day it has devel­oped a tool with data sci­en­tists to an­a­lyze data to de­tect cir­cu­lar trad­ing pat­terns.

When test­ing with known cases, it was able to de­tect roughly 94 to 96 per cent of what had been de­tected man­u­ally, she added.

“What used to take us months to do, can now be done in a mat­ter of hours,” she said. “That’s re­ally ex­cit­ing for us.”

The U.S. Se­cu­ri­ties and Ex­change Com­mis­sion’s co-direc­tor of en­force­ment Stephanie Avakian said it too has used these tools to speed up their probes, but it doesn’t re­place the need for ex­pe­ri­enced in­ves­ti­ga­tors to go through the find­ings and use judg­ment.

“The data an­a­lyt­ics are great for iden­ti­fy­ing prob­lems and putting to­gether a case, but I don’t think they ob­vi­ate the need for hu­man in­ves­ti­ga­tors ..., ” she said.

As well, Avakian said when fi­nan­cial mis­deeds later go be­fore a jury, hu­man wit­nesses are still needed to help present their case.

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