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Web Watch: Best of the Week Ending November 4

Bruce Carton | November 4, 2011

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 November 4.

The Challenges of Prosecuting Rajat Gupta
DealBook | Peter J. Henning | Nov 4, 2011
Proving that Mr. Gupta received some type of benefit will be crucial to the government's case because without it there is no tipper liability for insider trading....This issue may signal a potential line of defense that Mr. Gupta can offer at trial, especially if the wiretap evidence is admitted. While it will be difficult to deny that he spoke with Mr. Rajratnam at crucial times, Mr. Gupta can defend himself against the charges by arguing that he was just telling a friend about corporate developments but never expected to benefit from it personally. In effect, he can try to throw Mr. Rajaratnam “under the bus” by arguing that he was as much of a victim of insider trading because his trust was betrayed by a longtime friend.
SEC v. Gupta, Redux
The Race to the Bottom | J. Robert Brown Jr. | Nov 4, 2011
.... The newly filed action by the SEC once again raises the wisdom of Gupta's efforts to obtain dimissal of the administrative proceeding (we have criticized the court's reasoning on this Blog).  Had the administrative proceeding been taking place, Gupta through discovery might have obtained more insight into the government's theory of the case and the evidence that it intends to present.  Moreover, as we have noted, the settlement of an administrative proceeding is viewed generally as less serious than a settlement of an injunctive proceeding. 
Citigroup and the SEC, Judge Rakoff Has a Few Questions for You
D&O Diary | Kevin LaCroix | Nov 4, 2011
There will be those who believe that it is about time that somebody started asking these kinds of questions. But at the same time, it is worth noting that if companies must admit to wrongdoing in order to settle SEC enforcement actions, or if senior executives' complicity must be alleged or even established in order for a settlement to be approved, it will be far more difficult for SEC enforcement actions to be resolved. Indeed, one clear implication if more courts start asking these kinds of questions about proposed SEC enforcement action settlements is that fewer cases will settle and more will have to go to trial. Even if more trials would advance the truth-telling function of SEC enforcement, it would also add enormous costs both for the SEC and for the corporate defendants. Whether the SEC could sustain the same level of enforcement activity if it had to absorb the added burdens and expense involved with more trials is one question. The added burden and expense for the corporate defendants presents other questions.
To Err Is Human . . . and Punishable by the SEC
CFO | Russell G. Ryan | Nov 2, 2011
If you ran a chronically underfunded department that was part of an organization in urgent need of across-the-board belt-tightening, would you go out of your way to take on new responsibilities with your limited resources?I doubt it.But according to recent media reports, the Securities and Exchange Commission has decided to do something similar in the midst of the overall federal budget debate. Even as the SEC pleads for more resources from Congress to keep up with existing responsibilities and the mind-boggling array of new regulatory burdens dumped upon it by last year's Dodd-Frank financial reform act, the agency reportedly intends to expand its enforcement reach. The regulator will apparently pursue not only its signature cases against deliberate and reckless fraudsters, but also cases against people who make merely negligent mistakes.
iticized 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 form