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 2.

M&A Litigation: A Potential Partial Solution to a Big Problem

Douglas W. Greene, D&O Discourse

I doubt I need to convince many people, including a great many plaintiffs' lawyers, that the explosion of M&A cases is a problem.  The problem, of course, is not that shareholders bring lawsuits challenging mergers.  Challenges to transactions based on problematic processes, such as the one at issue in Smith v. Van Gorkom, have improved corporate decision-making.  Rather, the problem is that virtually every acquisition of a public company draws a lawsuit, even though very few transactions are actually problematic, and most cases are filed very quickly, before plaintiffs' lawyers could possibly have enough information to decide whether the case might have merit.

The result is spurious and wasteful litigation.  But very few cases present significant risk, so the vast majority of cases present a simple nuisance that can be resolved through painless additions to the proxy statement and a relatively small payment to the plaintiffs' lawyers.  Although companies that are sued bemoan the macro M&A-case problem, each individual company understandably focuses on its own case, and the vast majority conclude that it's best to settle it rather than defend it to the bitter end.  Collectively, however, the M&A-case problem is significant and needs to be addressed.

Judge Rakoff and the Emperor's New Clothes

Ifrah Law, Crime In The Suites

On October 24, 2012, U.S. District Judge Jed Rakoff sentenced Rajat Gupta to 24 months after he was found guilty by a jury of one count of conspiracy and three counts of substantive securities fraud, in connection with providing material non-public information to convicted inside trader Raj Rajratnam. This two-year prison sentence was substantially below the applicable advisory range under the United States Sentencing Guidelines and, in the week since that ruling, much has been said about whether or not this sentence was appropriate.

But the most remarkable part of Judge Rakoff's sentencing ruling was his unflinching analysis of the way in which the application of the Sentencing Guidelines to white collar fraud cases does not reflect empirical analysis about those offenses or those who commit them – an argument that defense counsel have been making for some time with mixed success.

Judging if Wiretaps Are Necessary

Peter J. Henning, DealBook

"Necessity” is a simple word that means “an imperative requirement or need for something.” In Raj Rajaratnam's appeal of his convictions for conspiracy and insider trading that will be heard on Thursday by the United States Court of Appeals for the Second Circuit, the critical issue will be whether the government established that it needed to use wiretaps because other avenues of investigation were not fruitful….

If a wiretap was not properly authorized, the statute prohibits using the evidence at a trial. For Mr. Rajaratnam, that would lead to reversal of his convictions because the wiretaps were crucial to proving the case.

Proposals to Address the M&A-Related Litigation Problem

Kevin LaCroix, The D & O Diary

Although there are many aspects of the M&A litigation problem, the paper focuses its proposed solutions on the multiple jurisdiction litigation issue, in part because it is “a principal source of the trial lawyers' settlement leverage.” ….

In order to address these issues, the paper suggests three possible legislative reforms (not necessarily mutually exclusive) at the federal level. First, the paper suggests that Congress could “enact a statute requiring all merger-related litigation to be brought in the state of incorporation of the defendant company.” …. Second, the paper suggests that Congress could amend the “carve outs” in SLUSA and CAPA to required that class actions brought under the carve-outs “may be filed only in the courts of the defendant company's state of incorporation.”  Third, to address the fact that many of these merger related lawsuits are brought in federal court, the paper suggests that Congress could enact legislation providing that any lawsuits relating to mergers or acquisitions that are brought in federal court should be transferred immediately to a federal court for the district containing the state capital.

SEC Lays Out Standards for 102(e) Proceedings

David Smyth, Cady Bar the Door

One of my favorite things as a legal researcher is when a court does my work for me.  It doesn't happen often, but sometimes a court takes a complicated subject and outlines the law with sufficient supporting authority to give comfort that by studying the opinion, readers have gotten a good start on understanding that law.  The SEC essentially did that last month in a contested administrative proceeding concerning SEC Rule of Practice 102(e).