Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, September 12, 2014

SEC Announces the Creation of the Office of Risk Assessment

The SEC has announced the creation of the Office of Risk Assessment within its Division of Economic and Risk Analysis.  The press release in part states:

Since its creation in 2009, DERA has collaborated with market experts throughout the SEC to develop risk assessment tools. One example, the Aberrational Performance Inquiry, launched in 2009 to proactively identify atypical hedge fund performance, led to eight enforcement actions and is one of the tools used by the Division of Enforcement to assess private funds. Similarly, DERA developed a broker-dealer risk assessment tool that helps SEC examiners allocate resources by assessing a broker-dealer’s comparative riskiness relative to its peer group. It also is working closely with the Enforcement Division’s Financial Reporting and Audit Task Force and the Division of Corporation Finance on developing a tool to assist in identifying financial reporting irregularities that may indicate financial fraud and help assess corporate issuer risk.

“The Office of Risk Assessment will build on the existing expertise of DERA’s staff, which includes economists, accountants, analysts, and attorneys, to provide sophisticated assessments of market risks. The establishment of this new office reflects the Commission’s ongoing focus on deploying data-driven analytics to assist in routing scarce resources to areas of the greatest risks to the market,” said DERA Deputy Director Scott W. Bauguess, who oversees the division’s risk assessment activities.

Initial staffing of the new Office of Risk Assessment will be drawn from across DERA and the division will seek a new assistant director to head the office. The office will continue to develop and use predictive analytics to support supervisory, surveillance, and investigative programs involving corporate issuers, broker-dealers, investment advisers, exchanges, and trading platforms. In addition, the office will support the SEC’s ongoing work related to the Financial Stability Oversight Council.

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