Throughout the week over at Securities Docket I highlight the most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation. Here is a digest of my picks for the week ending October 28.
Bloomberg News | Robert Schmidt and Joshua Gallu | Oct 28, 2011
His blunt reports have won Inspector General H. David Kotz admiration on Capitol Hill, where lawmakers summon him to testify about his efforts to improve what they have criticized as flawed management and oversight at the regulator.At the SEC, it's a different story. While inspectors general are rarely beloved, a backlash against Kotz among staff and managers has grown in intensity and spread to the legal community outside the agency. Now critics led by former SEC Chairman Harvey Pitt say Kotz is undermining the market regulator's effectiveness.
The Curious Capitalist | Bill Saporito | Oct 27, 2011
... But now that the heavy artillery of U.S. Attorney's office has been brought to bear, the potential outcomes of these cases have changed to an extraordinary degree. Gupta could do hard time for blabbing to a buddy. Will that prospect, and Bharara's breakthrough access to wire tapping, make insider trading go away? Of course not. But if a guy like Gupta loses, you can expect the Street to lean very heavily on its pals in Washington to redefine the law. Because if this is a crime, then there are likely more criminals than not on Wall Street. But you were thinking that anyway.
ased on the major cases the S.E.C. has brought, a pattern has emerged. It is making one settlement per firm and concentrating on only the safest, most airtight cases. The agency's yardstick seems to be, who wrote the stupidest e-mail? ... This is a matter of will and leadership. Its chairwoman, Mary L. Schapiro, while deserving credit for pushing investigations of structured investments, is sending the signal that she does not want to lose. Her agency is meekly willing to get token settlements when the situation calls for Old Testament justice.
It was Rajaratnam's understanding that were he to plead guilty and wear a wire, he might be offered a sentence of as little as five years....Why didn't he take the plea? Rajaratnam was a man who lived for information; his entire business edge was built on acquiring information before others did. But when it came to the biggest bet of his life, this master of information was guided—as he saw it—by the political history of his people, his personal journey as a dark-skinned immigrant through the rich countries, and a 3,000-year-old tradition of astrology.
In a recent SEC complaint filed on October 6, 2011 (two weeks after the Kelly decision) the agency charged corporate executives with scheming to arrange fictitious transactions to recognize revenue with both direct violations of Section 10(b) and Rule 10b-5, and aiding and abetting. See SEC v. Christopher Sells and Timothy Murawski, No. 11-CV-4941 (N.D. Cal.). The Kelly analysis would seem to dictate that the two defendants be charged only with aiding and abetting rather than direct violations. However, just as in Kelly the SEC charged Sells and Murawski with both direct violations and aiding and abetting. It would seem that the SEC does not accept the Kelly decision and intends to keep the issue alive until multiple courts of appeals have a crack at the issue.