The SEC's Tough New Offensive on Insider Trading

Insider-trading scandals have been a fact of market life since the Dutch were hawking East India Tea. And the high-stakes bust on Oct. 16 of Raj Rajaratnam, the billionaire founder of hedge fund Galleon Management, for allegedly trafficking in ill-gotten information includes the usual array of investment analysts, corporate executives, and clock-punching interlopers.

But the Securities & Exchange Commission's recent action against Galleon evinces a new offensive against the notoriously difficult-to-prosecute crime. Armed with informants, wiretaps, and intricate software tools, the federal agency—still smarting after missing the Bernard Madoff Ponzi scheme—is signaling a bolder stance on insider trading. "It would be wise for investment advisers and corporate executives to closely look at [the Galleon] case and consider what lessons can be learned and applied to their own operations," SEC enforcement chief Robert Khuzami said in a press conference.