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 26:

The SEC's Risky Expansion of Insider-Trading Cases

AOL's Daily Finance | Charles Wallace | Nov 24, 2010

Many hedge funds prosper by taking outsize bets on companies based on their reading of the firm's future fortunes. Often, they employ experienced industry analysts and compile detailed information on the company to make those judgments. But now, the federal government now appears to be trying to broaden the definition of insider trading to include the information-gathering of hedge funds as criminal activity. Which raises the interesting question: What's the difference between a good analyst and a criminal?

Nice Guys, Naughty Information? (WSJ, sub. req'd)

WSJ Opinion | Holman W. Jenkins, Jr. | Nov 24, 2010

Once it was deemed that the person acting on the information was naughty because, however valuable and accurate the information, acting on it involved a betrayal. An executive who traded on inside information betrayed his shareholders. A lawyer who traded on advance word of his client's deal betrayed his client. You could buy or not buy this theory, based on whether you think the benefit of having the information in the stock price outweighs using criminal law to improve the climate of trust between principals and agents. But it was not insane. Insane is what has happened to insider trading law over the past generation, and by all portents may reach its culmination in today's widely leaked FBI crackdown on hedge funds and research firms.

Insider Trading Scandal: The New Definition of Research

Seeking Alpha | Mark McQueen | Nov 24, 2010

It will be fascinating to see where the FBI, and the U.S. Courts, wind up on the idea that channel checks are just basic, shoe leather research. In the meantime, the definition of what “inside information” actually is, and if it extends to the supply channel of the world’s tech goliaths, may be up for debate. The Analyst’s long-held argument is the fact that they’ve learned from a supplier that orders are down, which may well mean that earnings will be down for their client, isn’t “inside information” by definition. Just good research. The FBI may be asking itself “but isn’t it material non-public information?”

Preet Bharara’s Arms Race Theory of Insider Trading

CNBC's NetNet | John Carney | Nov 22, 2010

Getting back to Bharara, the new theory that is being marshaled against insider trading seems to be based on the idea that the pursuit of non-public information is resulting in an inefficient informational arms race. That’s the strongest case against the use of performance enhancing drugs in sports—that it creates an “arms race” atmosphere where players who wouldn’t otherwise use drugs feel pressured to begin using them to keep up with the enhanced players. In the end, if everyone ends up using performance enhancing drugs, no one winds up with an “unfair” advantage but lots of time and resources are wasted on the drugs.

FBI Visit Sheds Light on Tactics in Insider-Trading Probe

WSJ | Susan Pulliam | Nov 22, 2010

The Federal Bureau of Investigation's attempt to pressure an independent analyst to record his calls with a client offers a window into how the government is trying to build what could become one of the most far-reaching insider-trading cases ever. John Kinnucan says he was sipping wine on his front porch in Portland, Ore., on Oct. 25 when a gray sedan pulled up and two men in business suits jumped out, identifying themselves as FBI agents. The two men accused Mr. Kinnucan, 53 years old, of passing inside information to his hedge-fund and mutual-fund clients, he says. He says they threatened to arrest him and asked him to cooperate with their investigation by tape-recording his calls with a client. Mr. Kinnucan declined the offer, and later that night he sent out a blast email to his clients detailing the visit.

Fake Madoff profit built on real work

Palm Beach Post | Jane Musgrave | Nov 21, 2010

The tedious process that consumed Annette Bongiorno and JoAnn "Jodi" Crupi as they allegedly helped build and maintain Bernard Madoff's phony empire was painstakingly described by federal prosecutors and SEC investigators who filed multiple charges of security fraud against the women in criminal and civil complaints last week. The two women, along with two high-ranking office managers and two computer programmers, were the workhorses that pulled the plows that buried so many investors under a mountain of phony paper and broken promises, authorities charge in the lengthy complaints filed in New York City.