By most measures, the government’s recent multi-year crackdown on insider trading has been an unqualified success. The U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) have scored high profile trial victories, including against Raj Rajaratnam and Rajat Gupta, and won substantial resolutions, including $1.8 billion in settlements with SAC Capital Advisers and its affiliates CR Intrinsic Investors and Sigma Capital.
Recently, however, the SEC has had some missteps, most notably at trial. While during the three-year period ending November 2013, the SEC’s success at trial was approximately 80 percent,1 that rate dropped to below 60 percent from October 2013 through March 2014, due in part to a string of losses in insider trading cases. Specifically, of the 12 cases the SEC tried overall during that period, it won three, had mixed verdicts in four, and lost five outright.2 To some, the losses in three of the insider trading cases—SEC v. Steffes, SEC v. Schvacho, and SEC v. Cuban—have raised questions about the ability of the SEC to try cases effectively, an important issue if the SEC’s recent decision to seek admissions more frequently in settlements results in more trials.
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