SEC Chair Mary Jo White has been touting the agency's use of new technology as a "force-multiplier," and yesterday's enforcement action against investment adviser Ambassador Capital Management appears to be a good example of that strategy. The SEC announced that it had charged the firm and a portfolio manager with fraud for repeatedly making "false statements to trustees of the Ambassador Money Market Fund about the credit risk in the securities they purchased for its portfolio," as well as about the fund's exposure to the Eurozone credit crisis of 2011 and the diversification of the fund's portfolio. 

The SEC stated that the action resulted from an ongoing analysis of money market fund data by its Division of Investment Management. Specifically, IM is reviewing the gross yields of funds as a "marker of risk" and looking for outliers. After IM's review flagged the Ambassador Money Market Fund's performance as being "consistently different from the rest of the market," it referred the matter to the Enforcement Division, which pursued its own investigation.

Norm Champ, Director of the SEC's Division of Investment Management, called the enforcement action an excellent example of how the agency's investment in data analysis leads directly to investor protection and can produce "solid information for examination and enforcement use.”

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