Professor Says SEC Withholding Data That Could Predict Fraud

Nov 4 2014 | 5:11am ET

Is the Securities and Exchange Commission withholding data that could help academics and investors alike better understand—and choose—the hedge funds to which they entrust their money?

Robert Jackson, a prominent law professor at Columbia University, last year sought years of data about investment advisers, which he hoped to use to write about predicting broker fraud based on past behavior. But the regulator—which rejects more than half of all Freedom of Information Act requests it receives—said it didn’t have the information. It directed Jackson to the Financial Industry Regulatory Authority, which, as a self-regulatory body, isn’t subject to FOIA.

But Jackson notes that an academic paper published earlier this year would indicate otherwise: Stephen Dimmock cited five years of Form ADV data in his own paper on predicting fraud—and said he got it from SEC economist Jennifer Marietta-Westberg.

“There’s only two papers in the history of the academy using Form ADV,” Jackson said in an interview with Forbes magazine. “One by her friends, and one by her. So if you don’t have the data, where’d your economist get it?”

The SEC would not comment on how Marietta-Westberg got the Form ADV data.

“The weird thing is they found you can predict fraud, but the data they use isn’t available,” Jackson noted. “It’s a remarkable paper, made completely useless by the SEC’s policies.”

“To me, the SEC’s goal should be to make it really easy for investors to find that information.”


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