How does FINRA define what constitutes an alert and an outlier?
INSITE uses statistical analysis techniques to determine alerts and outliers. Statistical process control approaches are used to establish upper and lower control chart limits for each measure of a firm’s activity. These limits are derived from the pattern of variation for each measure and are unique to each firm. As such, these techniques identify changes from normal behavior in the firm’s pattern. Outliers are identified by comparing a firm’s measure to the distribution of measures for all the firms in the associated peer group. A value for a firm that is outside (higher or lower) the range of variation for a peer group is an outlier. Neither alerts nor outliers are evidence of regulatory violations. Rather, they signify either changes in a firm’s behavior or behavior significantly different from its peers. Only a review of the situation can determine whether significant regulatory issues exist.
