5 - Major Event
Action: Cross-functional effort to modify corporate policies required ASAP

Details: The Wall Street Journal is reporting that The Securities and Exchange Commission has sent at least three dozen subpoenas to hedge funds and brokerage firms within the past month related to a sweep of potential insider-trading violations.   It is being reported that at least some of the inquiries are focused on potential information leaks around health-care and retail-industry mergers.

It is likely that the SEC will begin their review of communications within and among their targets.  Initially, the SEC’s investigative focus will center on email, instant messaging and communications through other means such as the firms’ trading platform(s), i.e. the Bloomberg messaging and chat tool . The Wall Street Journal quoted Barry Goldsmith, a partner at law firm Gibson, Dunn & Crutcher LLP in Washington D.C. and former chief litigation counsel in the SEC’s enforcement division.  Mr. Goldsmith hit the nail on the head when he said, “The regulators’ ability to connect the dots across multiple deals is greater than we’ve seen in the past. They’re diagramming these cases, looking for relationships, with more-sophisticated surveillance tools and a focus on hedge funds.”
These initial subpoenas are likely just the tip of the iceberg.  We can expect further rounds of subpoenas based on what the SEC learns from the data they receive in response to these initial subpoenas.

How Does This Affect My Enterprise?

• eDiscovery review platforms, such as Recommind’s Axcelerate eDiscovery, that have more than just keyword search functionality will be demanded.  Legal and compliance professionals need review tools that are automated, conceptual search-based and have the ability to conduct predictive coding.  Review tools that only provide keyword searching will be inadequate for many reasons including that keyword searching alone can miss the use of code words and deal names which are common in the investment banking industry; and, keyword searching alone can yield an extremely high rate of false positives in investigations such as where a company’s ticker symbol is used as a search term.
• Firms and their legal counsel will need an eDiscovery review application that can quickly cull, organize and analyze email.  An eDiscovery platform such as Axcelerate eDiscovery will allow firms and their legal counsel to do what the regulators will do which is connect the dots across multiple deals through communication mediums such as email.  Regulators  will try and diagram these deals looking for relationships between the firms, their clients and hedge funds- review tools supporting legal professionals must be able to do the same. 
• Tight production deadlines require a review platform that can be deployed quickly on a hosted model like Axcelerate eDiscovery On-Demand.  Legal counsel will want to commence review of potentially responsive ESI as soon as possible which calls for a review tool that can be quickly deployed across multiple sites and reviewers.
• Firms that have deployed an in-place early case assessment, collection, processing, culling and preservation tool, like Recommind’s Insite Legal Hold, will be at a distinct advantage since they will be able to assess their data in regards to these subpoenas immediately, apply litigation holds where necessary and provide their outside legal counsel with data that is responsive.  All of which will reduce costs, quickly assess risks and meet production deadlines.