Catelas:Next Generation eComms Supervision and Surveillance

Over the past three years, the SEC has filed more insider trading actions (168 total) than in any three-year period in the agency’s history. Insider dealing, market manipulation, and the movement and sharing of Material Non- Public Information (MNPI) are activities conducted between individuals with strong trusted relationships. People who do not know each other well tend to not collaborate in such manners. The common link found in almost all cases is the strong connection or relationship among the responsible individuals. Familiarity creates a breeding ground for market manipulation and insider trading.

A risk-based approach driven by patented behavioral analytics is the key to uncovering these relationships and the associated collaborative networks within and between firms. To facilitate such an approach, Catelas, headquartered in Wellesley, MA, combines social network analysis and behavioral science algorithms that bring together information about the organization’s employees, their communications, and the trades they execute. This allows Catelas to present the compliance analyst with an unprecedented view into how business is conducted, which makes compliance considerably more efficient, while guiding the analysts to where the risks are greatest.

Relationship Forensics, the core engine behind all Catelas’ applications, helps the legal, security and compliance functions automatically identify the key people within any network and quickly isolate key evidence. The program reduces cost and time but, more importantly, allows the company to gain a clear understanding of its risks and quickly isolate potential problems.

“Catelas Relationship Forensics is a fundamentally new approach to the investigative and surveillance paradigm. It helps companies identify both the internal and external people most likely involved in an illegal activity by automatically revealing who is talking to whom, when they connected, and how well they know each other,” says Eddie Cogan, CEO of Catelas.
The software is unique in the market today due to its speed and its accuracy. Catelas’ solutions are used by a broad client-base including a number of Tier 1 law firms, top global forensics consultancies, large banks, and hedge funds as well as major global corporations.

One client, a large hedge fund, had beenreviewing 1 percent of all communications based on random samples and lexicons for many years. They were keenly aware that such an approach not only provided poor insight into the regulatory risks of the business, but also consumed a considerable level of resources. In addition, such traditional eComms review solutions are no longer a defense against charges of “failure to supervise” when issues do arise. Within a week of contracting with Catelas, the company’s compliance department was able to automatically visualize their information barriers, control rooms, watch lists and over 10,000 Bloomberg chat rooms. In addition to the scores of control breaches that were identified and remediated, Catelas helped the company realize a more comprehensive and defensible compliance program with a much more cost effective solution.

“Catelas brings to bear a degree of analytics and automation not seen before in the industry. People, their relationships, what they say, and the trades they execute are combined to allow the analyst to quickly and holistically understand what is happening so they can manage risk more effectively,” says Cogan.

“What’s next? Based on our investigation experience, we have been able to identify behavioral signatures associated with a variety of risks. The knowledge we gain allows us to roll out a surveillance system that can identify sudden increases in risk around certain transactions or relationships. Soon we believe we will be able to identify high risk signatures before the transaction is consummated. A preventative model would clearly be a game changer,” continued Cogan.


Combining advanced behavioral analytics and relationship forensics helps compliance departments utilize a more comprehensive and defensible program allowing analysts to quickly identify, isolate, and remediate risk