I was on a call last week about the SEC’s changing priorities under Chairperson Gensler and the consensus among all of the attorneys on the call was that they will be more data-driven and have already been using data analytics far more extensively than ever before. I suspect the case in the linked release came about from those efforts:
> “Using sophisticated data analysis, the SEC was able to uncover this insider trading ring and hold each of its participants accountable to ensure the integrity of our markets,” said Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit.
I think in time the SEC’s enforcement in this area will become more automated and efficient.
I don’t have a good resource to point you to because most of what I know is from having seen data requests and from discussions with colleagues. To my knowledge the SEC hasn’t said much about how they use analytics and I suspect that’s deliberate.
The SEC has been gathering data after big price swings to identify potential insider trading for a while but my understanding is that they’re now able to assign an insider-trading risk-score to transactions that made money (or avoided a loss) by trading just before the swing.
What’s interesting is the risk-score seems to involve some degree of “who you know” and seems to de-emphasize the old metric used to prioritize investigations: how big your profit/loss avoided was. So rather than having to identify the big winners (or loss avoiders) and investigate those transactions they can instead focus on the transactions most likely to have been “tipped” by an insider. (This is entirely my own speculation but I think you can see it a bit in the attached press release. It’s an unusual chain of relationships between and among the six people charged and the two public companies. Insider > tips friend > tips guy who owes him money > tips three friends. I’d venture to guess there was some transaction data that allowed the SEC to form the link between the accounts profiting and the insiders because $1.7 million isn't a terribly huge sum to have SEC staff chasing after.)
It also seems, judging by Gensler’s recent comments, they’re considering gathering data about planned and forgone 10b5-1 transactions presumably for the purpose of applying insider trading analytics.
After they knew who to investigate it likely was easy, but I don't see how they discovered who to investigate in the article you linked.
You need some way to detect smoke before you can go looking for the fire. And given the large number of trades in the US stock markets, I don't believe this is an easy problem.
Levine’s analysis is regarding to the evidence gathered from the investigation while the statement from the press release refers to whether or not a group of transactions warranted investigation in the first place. The “sophisticated analysis” the SEC refers to is akin to an if statement while the evidence set forth in the complaint (and referenced by Levine) is the result of running “then investigate” when $isSuspicious returned true.
> “Using sophisticated data analysis, the SEC was able to uncover this insider trading ring and hold each of its participants accountable to ensure the integrity of our markets,” said Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit.
I think in time the SEC’s enforcement in this area will become more automated and efficient.