An April 19, 2012 article by Devin Leonard of BusinessWeek profiles Sanjay Wadhwa, currently a deputy chief of the SEC’s market abuse group. The article takes a close look at the insider trading investigation of Raj Rajaratnam (and the many leads that investigation has yielded). Although many bloggers point out situations where the SEC or prosecutors are criticized (this blog included, in entries such as here and here), the BusinessWeek article, entitled "The SEC: Outmanned, Outgunned and On a Roll," is instructive in highlighting how the SEC overcomes disadvantages and what it has done to improve its investigative efforts in recent years.

The article focuses on the investigation into the Galleon Group (including a May 2007 subpoena which yielded 4 million pages of documents, hundreds of thousands e-mails and 50,000 instant messages). Those documents yielded key discoveries such as the remarkably similar trading by Mr. Rajaratnam and his younger brother Rengan (which led the SEC to examine Mr. Rajaratnam more closely), and instant messages between Mr. Rajaratnam and Roomy Khan (a witness who ultimately cooperated with prosecutors). As the article points out, the Galleon investigation has led to 56 arrests and 48 convictions, including the conviction of Mr. Rajaratnam, his subsequent sentencing to 11 years in prison and the SEC’s civil judgment against him for over $92 million.

The article emphasizes a number of the bureaucratic challenges SEC staff members like Mr. Wadhwa faced, as well as detailing how things have changed in recent years (particularly with the appointments of Mary Schapiro and Robert Khuzami). For example, the article describes the "unfathomable bureaucratic iceberg" which existed previously, that, for example, required multiple levels of review to have a subpoena issued. However, now an attorney within the Division of Enforcement can act immediately to get a subpoena issued, without going through layers of review.

The article also emphasizes the SEC’s interaction with criminal prosecutors and the different powers they each have. For example, the criminal prosecution of Mr. Rajaratnam featured evidence from wiretaps, but the SEC is not permitted to use them. Mr. Wadhwa questioned that policy, saying: "… the U.S. Fish and Wildlife Service has access to wiretaps and the SEC doesn’t? And somehow you expect us to oversee Wall Street?"

Ultimately, the Commission moves slowly at times, can be an advantage, according to the article: "As an investigatory method, this translates into the staff collecting as much information as possible – phone records, trading records, lists of people at public companies who possessed confidential information – and sequestering themselves until they figure out if they have anything."

For those who follow matters investigated and litigated by the SEC, the BusinessWeek article provides a rare insight into how the SEC performs those tasks and what changes have occurred in their methodology in recent times.