FINRA VP Describes "Insider Trading Detection Program"
Karen Braine, Vice President of the Insider Trading Detection Program, described how her team employs sophisticated technology and analytics to monitor trading activities in the U.S. securities markets for suspicious patterns.
During an episode of FINRA Unscripted, Ms. Braine described how FINRA pulls together actionable intelligence to go after inside traders. The regulator said that FINRA covers "100% of the U.S marketplace in stocks, bonds, options and other securities derivatives." Ms. Braine said that FINRA investigations last year resulted in more than 450 referrals to the SEC and other regulators.
Ms. Braine explained that insider trading investigations typically span six to eight months, culminating in 10 to 30-page documents. She said that her team gathers vast amounts of data from multiple sources to establish connections between traders and relevant stock activities before a significant news announcement. According to Ms. Braine, this involves analyzing millions of trades to pinpoint the most suspicious accounts, investigating the traders and conducting further analysis to determine if the trading could be considered insider trading. She said her team also uses tools like social media and geographic proximity analytics to identify potential sources of material, nonpublic information.
Ms. Braine touted FINRA's increasingly sophisticated use of technology. She said that FINRA is "analyzing more data faster, and [is] using that data in more innovative ways to make connections between insiders at companies and traders in that company securities." She said that FINRA is continuously adding external data sources, and enriching internal data sources, to make the most use of intelligence produced by FINRA's regulatory and examination programs. She said FINRA is well-positioned to detect insider trading because of its "cross-market view of trading activity" which gives it the ability to see trades "no matter where they're placed or executed." She noted the use of the Consolidated Audit Trail in providing data that helps to identify potential insider trading.