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Could computer algorithms predict misbehaving brokers?

The answer to the question appears to be yes. This adds to the list of things algorithm can be used for which includes discovering breaking news, tracking consumers and even hunting terrorists. In the case of financial matters misbehavior is accomplished by:

  • Mining data—such as emails or phone transcripts.
  • Running big data analytics.
  • Drawing conclusions based upon that analysis.

Essentially a computer analysis of communication between people, the more data available the easier it will be to make a prediction. Without the algorithm, many emails that contain obviously inappropriate material would likely sneak through.

The focus of this type of analysis is on linguistic patterns used in everyday correspondence between individuals in the financial sector, including email, text or phone transcripts. When those patterns are deviated from it could be a reason to look a bit more closely.

The approach has been found to be very effective. In fact, as compared to how algorithms are used to track stocks, they are actually much more effective at predicting what an individual will do.

Before investors can take action against those who have wronged must first be identified. In the long run it is possible that this approach could reduce the number of broker misconduct situations that arise. In the meantime however those who find that the people they trusted to take care of their money used it to do illegal things could try to recoup what they lost. Individuals who find themselves in this situation would likely benefit from working with a lawyer to try to do so.

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