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 May 13.

Deprioritize insider trading

Professor Bainbridge | Stephen Bainbridge | May 13, 2011

Unfortunately, the SEC long ago discovered that Congress loves insider trading cases (as long as they're not brought against members of Congress). In the wake of blowing the Bernie Madoff case and taking a lot of hits for failing to prevent the 2008 crisis, the SEC is going to keep bringing insider trading cases so as to distract attention from its many failures.

SEC Whistleblower Office Does Not Want To Talk To You

Forbes' Financial Watchdog blog | Edward Siedle | May 12, 2011

You have got to try this one for yourself. Just try calling the SEC saying you're a whistleblower and want to report a securities scam. I did so myself recently and it was a hoot.... It may be wrong to make fun of the SEC's awkward, half-hearted and conflicted effort to respond to whistleblowers but it is, nevertheless, fun.

Can a tweet meet the SEC's Fair Disclosure rules?

IR Web Report | Dominic Jones | May 12, 2011

Of course, the big question is whether a tweet by itself can make information public under Reg FD, and that isn't a question [the SEC's Tom Kim] answered directly. And we shouldn't expect him to because each question of Reg FD compliance is based on the facts and circumstances specific to an individual situation. However, since most securities lawyers are unfamiliar with how Twitter and other social media work, I thought it would be useful to explore in more detail from a technology perspective how the SEC's 2008 framework can be applied to Twitter.

Galleon Chief's Network of Friends Who Tell Secrets

DealBook | Peter Lattman and Azam Ahmed | May 12, 2011

What made Mr. Rajaratnam stand out was not his proprietary computer models nor his skills in security analysis. Instead, colleagues marveled at the deep set of contacts he had cultivated inside Silicon Valley executive suites and on Wall Street trading floors.

The Galleon Case Is Nowhere Near Over

DealBook | Peter Henning | May 11, 2011

With the conviction of Raj Rajaratnam on 14 counts of conspiracy and securities fraud, the Galleon Group insider trading case moves to its next phase.... There will undoubtedly be a number of challenges by the defense to Judge Holwell's evidentiary rulings and the jury instructions, but the key issue — as it has been since the case started in October 2009 — is the wiretaps. In a sense, the conviction of Mr. Rajartnam was won in large part once Judge Holwell rejected the defense motion to suppress the wiretap evidence....

FCPA: Guilty Verdicts in Lindsey Case

FCPA Professor | Mike Koehler | May 11, 2011

As a small privately held company, Lindsey Manufacturing was able to aggressively mount a legal defense that publicly traded companies are unwilling, or some would say are logistically unable, to mount. Whether one agrees with certain of the judge's pre-trial rulings or not, or whether one finds arguments about prosecutorial misconduct persuasive or not, the fact is, the Lindsey case, unlike the majority of FCPA enforcement actions, was subject to an adversary proceeding in which someone other than the enforcement agencies weighed in on the issues - and that is a good thing!

Enforcing Insider Trading Laws—Confusion Compounded

CNBC's NetNet | Henry G. Manne | May 9, 2011

Consider a situation in which a trader has done legitimate analysis of a security and believes, with 50% confidence, that the company will soon be a takeover target and with 50% confidence that the stock price will decline. No transaction is indicated. Now suppose that an unreliable tipster (right only 10% of the time) calls in with admitted inside information that a takeover deal is imminent. There may be several ways of calculating the new level of confidence, but in any event it is above the 50% level, and a buy is now indicated. Was this trade “based on” the inside information, or was it based on the legitimate research?

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