Counterarguments to SEC Statistical Analysis in Enforcement Actions and Inquiries

In recent years, the Securities and Exchange Commission has focused on using quantitative analysis to identify statistical outliers and anomalies through programs like the Aberrational Performance Inquiry, which evaluates hedge fund returns,[1] and the Accounting Quality Model (informally known as “RoboCop”), which scours public company filings to estimate “peer-level risk metrics.”[2]  Using enforcement actions involving the allocation of securities as an example, we explore issues raised by the use of statistics in SEC enforcement actions and inquiries.

Recent trade allocation actions by the SEC

In the last few years, the SEC has announced multiple enforcement actions against investment … Read more