The U.S. Securities and Exchange Commission has introduced three new initiatives to enhance the ongoing efforts to bear-down on high-risk areas of the market and implement cutting-edge technology and analytical capacity to its investigations.
“These initiatives build on the Division’s unmatched record of achievement and signal our increasingly proactive approach to identifying fraud. By directing resources, skill, and experience to high-impact areas, we will increase the potential for uncovering financial statement and microcap fraud early and bring more cases aimed at deterring these types of unlawful activity,” Andrew J. Ceresney, co-director of the Division of Enforcement, said in an SEC statement.
To execute these goals, the Division of Enforcement has established:
• The Financial Reporting and Audit Task Force – dedicated to detecting fraudulent or improper financial reporting. The principal goal of the Task Force will be fraud detection and increased prosecution of violations involving false or misleading financial statements and disclosures. The Task Force will focus on identifying and exploring areas susceptible to fraudulent financial reporting, including on-going review of financial statement restatements and revisions, analysis of performance trends by industry, and use of technology-based tools such as the Accounting Quality Model.
• The Microcap Fraud Task Force – targeting abusive trading and fraudulent conduct in securities issued by microcap companies, especially those that do not regularly publicly report their financial results. The principal goal of the Task Force will be to develop and implement long-term strategies for detecting and combating fraud in the microcap market, especially by targeting “gatekeepers,” such as attorneys, auditors, broker-dealers, and transfer agents, and other significant participants, such as stock promoters and purveyors of shell companies.
• The Center for Risk and Quantitative Analytics (CRQA) – employing quantitative data and analysis to profile high-risk behaviors and transactions and support initiatives to detect misconduct, increasing the Division’s ability to investigate and prevent conduct that harms investors. As a central point of contact for risk-based initiatives nationwide, CRQA will serve as both an analytical hub and source of information about characteristics and patterns indicative of possible fraud or other illegality.
“The best investigative ideas usually come from the grass roots – staff in the field observing the market first-hand,” said George S. Canellos, co-director of the Division of Enforcement. “A key objective of the Center for Risk and Quantitative Analytics will be to assist these staff members, bringing them analytical techniques and computing capacity with special expertise in data mining, and help them translate their valuable ideas into timely, thoughtful, and targeted investigations of national scope.”
For more information, visit www.sec.gov
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