On March 1, 2011, the SEC brought an administrative proceeding against Rajat Gupta. The SEC alleged that Gutpa engaged in an insider trading scheme by providing information that he obtained as a Goldman Sachs board member to Raj Rajaratnam. Among other things, the SEC's "AP" against Gupta sought civil penalties under Section 929P of Dodd-Frank, new legislation that for the first time permitted the SEC to seek civil penalties against non-regulated persons in administrative proceedings.

On March 18, Gupta took the unusual step of suing the SEC right back, but in federal court. Gupta alleged that the SEC was attempting to retroactively apply the new provisions of Dodd-Frank to his alleged activity that occurred before enactment of Dodd-Frank. He further argued that by subjecting him to an AP, the SEC was treating him "differently from all other nonregulated persons from whom it has sought civil penalties for alleged insider trading by depriving Mr. Gupta of the most fundamental rights for defending against insider trading charges." Gupta claimed this would force him to meet an accelerated trial schedule that excluded key discovery necessary for his defense, and would also deprive him of the benefits of the Federal Rules of Evidence "which preclude unreliable evidence such as multiple layers of hearsay evidence that the Commission would seek to offer in an administrative proceeding." Gupta sought an injunction preventing the SEC from going forward with the AP.

The SEC asked the court to dismiss Gupta's lawsuit, but Judge Jed Rakoff denied the motion. Judge Rakoff ruled in July that the case presented a "well-developed public record of Gupta being treated substantially disparately from 28 essentially identical defendants, with not even a hint from the S.E.C., even in their instant papers, as to why this should be so.” He added that the decision to bring the case as an AP appeared to be an "exercise in forum-shopping.” 

The SEC could have appealed the ruling, but instead decided this week to proceed with an agreement it reached with Gupta on how to resolve this procedural mess. On Friday, August 4, the SEC filed an Order Dismissing Proceedings in the AP. The SEC wrote that 

The Commission has determined that it is in the public interest to dismiss these proceedings.  Dismissing these proceedings will not prevent the Commission from filing an action against Mr. Gupta in United States District Court.

Gupta similarly agreed to withdraw his lawsuit in federal court against the SEC, saying that it “has achieved all of the relief he sought.” This matter is far from over, however, and will likely resurface soon in the form of a case by the SEC filed in federal court. Indeed, SEC spokesperson John Nester told Bloomberg that the SEC remains "fully committed to the case and will proceed as appropriate.”