SEC’s Insider Trading Charges Against Rajat Gupta Are a Sign of Its Newfound Power

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Rajat Gupta, the Goldman Sachs board member whom the SEC charged Tuesday with insider trading, is the biggest get so far in the agency's wide-ranging case against Galleon hedge-fund manager Raj Rajaratnam. (Yes, there are a lot of people with Raj-based first and last names involved in this insider-trading investigation, but consider it practice for the year 2030.) Gupta, who attended Harvard Business School, was both a former head at consulting giant McKinsey and had a stint on the board of Procter & Gamble. But the SEC might not have been able to charge him if not for new powers bestowed unto the agency by the Dodd-Frank bill. Before the bill, the SEC would have had to go to federal court to seek penalties against a board member. Now, says Businessweek, the SEC can bring these kinds of cases before its own administrative law judges.

Although SEC's streamlined administrative hearings make it easier to bring charges, and take up less time, there are some drawbacks. According to The Daily, administrative hearings have no jury, the "regular rules of evidence don't always apply," and judges in those hearings have less leeway to impose massive fines. Plus, there's no chance to work out our populist angst by yelling things from the stands.

Meanwhile, don't expect any tweets from Rajaratnam's legal team, which people are now referring to as the Rajaratnam 11 because there are yes, count 'em, eleven lawyers. A request for each of them to bring a personal electronic device was denied.

SEC Flexes Its Muscle [Daily]
With Dodd-Frank, the SEC Goes After Big Game [Businessweek]
Court to Rajaratnam 11: No Blackberrys For You [Law Blog/WSJ]