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 December 23.

Defending the SEC's Neither-Admit-Nor-Deny Policy

Cady Bar the Door | David Smyth | December 22, 2011

Abandoning the standard settlement language would mean the SEC could no longer pick its trial battles carefully, deciding which factual situations could get the agency the most bang for its litigation buck. Instead, it would have to prepare for almost every matter as if a trial were inevitable, because it almost certainly would be.

It's hard to know how many cases the SEC could resolve each year in this context, but it wouldn't be 735. It might be 40 or 50. To the extent this happened, the effect would be to fundamentally change the SEC's mission as a law enforcement agency….

Insider trading: Why do feds treat it like a mob crime?

CS Monitor | John Carney | December 21, 2011

To get the wiretaps, prosecutors had to stretch the law toward its breaking point. They argued that insider trading could amount to racketeering—one of the categories of law breaking that can be used to justify wiretaps. But this was itself a stretch. Racketeering laws were intended to be used against brutal gangsters, not traders taking advantage of informational asymmetries.

Clearly, the use of wiretaps in these cases goes far beyond the intent of Congress when it allowed racketeering as a justification for taps. But because the law was worded so broadly, it may be that Congress accidentally created room for this kind of legal creativity.

Record $285 million fee award is Strine's message to plaintiffs' bar

News & Insight | Alison Frankel | Dec 21, 2011

So why did Strine agree to grant such exorbitant fees? Because he was sending a message not just to the lawyers in the Southern Copper case, but to the entire securities class action bar....The chancellor also spoke about rewarding plaintiffs' lawyers for taking risks -- and chided defense lawyers for being envious when those risks pay off in big recoveries. If lawyers are willing to litigate big cases through discovery and trial, he suggested, Delaware will make sure they're well compensated for their efforts.

Happy Birthday!

FCPA Professor | Mike Koehler | Dec 20, 2011

I was born in 1977. Yet for most of my life, nobody cared or talked much about me. However, about eight years ago, my caretakers suggested that I change my look (get a new haircut, change my wardrobe, those sort of things). Boy did that help. In some circles at least, I am now the most popular person in town. Indeed, I recently read (see here) that I am one of the top legal concerns of general counsel. There are now numerous seminars and training sessions about me. In fact an entire industry of lawyers, accountants, and other business and compliance professionals have sprung up devoted to just me!...

An Inconvenient Truth

New York Times | Joe Nocera | Dec 20, 2011

On Friday, the Securities and Exchange Commission waded into the Fannie/Freddie wars by filing a lawsuit against three executives from each company. The complaint charges them with making “materially false” disclosures about the size of the companies' subprime portfolios. In unveiling the lawsuit, Robert Khuzami, the agency's enforcement chief, said that the S.E.C.'s action showed that “all individuals, regardless of their rank or position, will be held accountable.” Not really. What it shows is how desperate the S.E.C. has become to bring a crowd-pleasing case.

FBI Runs ‘Perfect Hedge' to Nab Inside Traders

Bloomberg | Patricia Hurtado | Dec 20, 2011

“It was reminiscent of that scene in ‘Jaws' where they get their first look at the shark,” Chaves said. He told Carroll, “We're going to need a bigger boat.” That bigger boat came in the form of a landmark change in the way white-collar crime is investigated in the U.S., agents said. The only way to uncover insider trading was to apply the same techniques agents used to dismantle the Mafia: court- authorized wiretaps of phones, informants and cooperating witnesses. At that moment, “Perfect Hedge” was born. This is the behind-the-scenes story of that historic, sprawling, nationwide insider-trading initiative by those who ran it.

The SEC's Important Enforcement Role

Corruption, Crime & Compliance | Michael Volkov | Dec 19, 2011

In contrast, it is much more difficult to identify, investigate and build case of accounting fraud against a public company. It takes time and resources. Prosecuting accounting fraud should be the SEC's bread and butter. The SEC needs to root out accounting fraud, comb and develop possible sources of such fraud, and monitor financial reporting of public companies. These are — and should be — the SEC's primary focus. For some reason, the SEC has veered off course. It is important for the SEC to right its ship and start concentrating on its core mission.

Topics