Not Enough
“This matter has been investigated for months,” said Tom Gorman, a former lawyer with the SEC’s enforcement division, now a partner at Dorsey & Whitney LLP in Washington. “Clearly the SEC does not have the facts to bring an insider trading case or they would have brought it.”
Gorman said the SEC’s action was based on two criminal insider-trading cases that have yet to go to trial. Should either Martoma or Steinberg be acquitted, it could damage the SEC’s proceeding, he said.
While he wouldn’t address the Cohen case specifically, Bharara took the unusual step in a speech last week of pointing out that prosecutors have other statutes, including conspiracy, that can push back any statute of limitations deadlines.
Rajat Gupta
The Commission’s solo action against Cohen is rare, however. One of the most recent administrative actions tied to insider-trading came in March 2011, and is perhaps the most prominent use of this less-than-lawsuit tool.
In that matter, the SEC filed an administrative proceeding against one-time Goldman Sachs director Gupta, accusing him of giving inside information to Galleon Group co-founder Raj Rajaratnam. Rajaratnam, 56, was convicted of masterminding the biggest hedge fund insider trading scheme in U.S. history and is serving an 11-year sentence.
Gupta, 64, countered by suing the agency in Manhattan federal court, arguing the SEC’s proceeding was a violation of his rights. He said the process wouldn’t give him access to evidence collected by the regulator -- evidence which must be turned over when a defendant is sued.
He also argued the administrative tactic, placing his fate in the hands of the agency making the allegations and a judge less independent than a federal jurist, was stacked against him.
Evidentiary Advantages