Subpoenas that the SEC recently has been sending to hedge funds and broker-dealers have sought much more information about possible insider trading violations and requested much broader access to firm personnel than was typical of such inquiries in the past. Toward the end of 2009 alone, more than three dozen such subpoenas reportedly were issued. By way of example, one such subpoena:
- sought the names of all individuals with authority over trading decisions at the recipient hedge fund and
- requested that every email sent or received by each such individual – over the course of more than two years – be produced.
Additionally, the SEC is no longer satisfied by being provided with documents and phone records; now the SEC also is requesting interviews with employees that have been identified in response to its insider trading subpoenas.
The SEC’s aggressive new approach is also evidenced by its use of wiretaps and confidential government informants (in cooperation with the U.S. Attorney’s Office and the FBI) in connection with the highly publicized insider trading ring allegedly associated with the Galleon hedge fund operation and its founder. Interestingly, in the Galleon case, investigators were tipped off by a single text message that had been buried in documents voluntarily turned over to the SEC by Galleon in 2007. Under pressure from the government, the author of the text message later agreed to record her telephone calls with Galleon’s founder, which paved the way for a subsequent wiretap. With the wiretap in place, investigators were able to significantly expand the reach of the investigation.