Last month in this column, we talked about the increasing importance of big data analytics in regulation, with a particular focus on the U.S. Security and Exchange Commission’s examination program. We discussed the National Examination Analytical Tool (NEAT), which the SEC has already deployed to review firms’ trading blotters, and other tools it has in development, such as Machine Analyzed Risk Scoring (MARS), which will be used to apply quantitative analytics to examination targeting. We concluded by noting that as a practical matter, when SEC examiners arrive at a firm armed with their new tools, they will not be impressed with less sophisticated compliance programs. Corporate counsel and compliance professionals should take a new look at their own processes in light of these regulatory developments.
In an interview with the author of this column, Andrew (Drew) Bowden, director of the SEC’s examination program, spoke about his expectations for compliance in this area. As a practical matter, he said, based on his own past experience in private compliance, firms do not want to learn something for the first time during an SEC examination. If the SEC is going to use big data tools during examinations, than firms should make sure they have a pretty good idea of what those tools will show before examiners arrive at the door. To do that, firms need to deploy similar tools to those in the regulators’ hands. In fact, Bowden said, he believes an important part of his mission is to encourage the private sector to move forward in this area. He hopes to promote compliance by “raising the bar” in regards to big data analytics.
