SEC Settles Fourth Cherry-Picking Enforcement

Gerald Hodgkins is quoted in a Compliance Reporter article regarding a recent settlement between Valor Capital Asset Management and the Securities and Exchange Commission. According to Hodgkins, the settlement serves as an example of the way the agency’s improved data analytics can help regulators spot potentially problematic activity. “What is different in this case is the efficiency of the SEC work. In the past they would have had to do much more manual analysis, which would have been more labor-intensive,” Hodgkins says. “The SEC now has data tools that automate the whole process, saving time and resources. This is a small case in a large SEC docket, and I’m not sure this would have been as appealing without the efficiency of SEC tools today.”

“This is up the SEC’s alley; they have developed incredible statistical tools to detect this behavior and do this work efficiently,” adds Hodgkins. “The practical thing the SEC can do is the statistical analysis they did in this case. There is not much speculation about whether he meant to allocate the way he did. It seems he did so at the expense of his clients. The SEC did a compelling statistical analysis of his conduct where they build a circumstantial case that is very powerful.”