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November 12, 2026
November 12, 2026 • 1-minute read
On May 23, 2023, Rahul Kohlhatkar, Assistant Regional Director in the Division of Enforcement at the San Francisco Regional Office of the U.S. Securities and Exchange Commission (“SEC”), shared the stage with a group of leading experts in the securities enforcement field at the Securities Enforcement Forum West 2023. The panelists, which included industry experts, securities enforcement and white-collar attorneys, and in-house counsel, broke down the SEC’s latest enforcement trends and upcoming regulatory agenda in the world of insider trading through a discussion of the SEC’s recent key actions. Valuable insights into the SEC’s evolving landscape of insider trading enforcement include:
The SEC’s continued interest in using data analytics tools
V&E published an article in 2022 about the SEC’s intent to use its own myriad of data analytics for insider trading cases, and the SEC has honored its words. Rahul Kohlhatkar emphasized that the SEC has a continued interest in utilizing its data analytics tool to identify suspicious trading activities. By utilizing data analytics techniques, the SEC aims to identify patterns or anomalies that may indicate potential insider trading.
This approach has already been exemplified by the SEC charging nine individuals in connection with three separate alleged insider trading schemes. All three actions originated from SEC Enforcement Division’s Market Abuse Unit’s (“MAU”) Analysis and Detection Center, which uses data analysis tools to detect suspicious trading patterns.1 Among the defendants are a former chief information security officer, an investment banker, and a former FBI trainee. These actions, all instituted on the same day, collectively yielded more than $6.8 million in ill-gotten gains.
The SEC will be on the lookout for cases where public company executives breach their duties
Though Kohlhatkar didn’t provide specific criteria for making an insider trading case a “good candidate” for the agency, he emphasized that the Division of Enforcement would be inclined to intervene if the circumstances were “too egregious.” One prominent example is the SEC’s action against two cousins, Andrew Stiles and Gray Stiles, for insider trading in the stocks of Eastman Kodak Company and Novavax Inc. based on nonpublic information related to both companies’ planned government partnerships to assist in the fight against COVID-19 at the height of the pandemic.2 “During a time of great turmoil, Andrew Stiles is alleged to have repeatedly abused his position as a government contract consultant to generate illegal trading profits,” said Joseph G. Sansone, Chief of the MAU when the SEC pressed the charges in February 2023.3
Another example of the SEC going after executives is the SEC v. Ramkumar Rayapureddy, filed on November 10, 2022. In Rayapureddy, the SEC charged the chief information officer of a pharmaceutical company, alleging the executive had tipped his friend and former colleague material nonpublic information about the company’s unannounced drug approval, financial results, and an impending merger with a division of Pfizer Inc.4 The SEC further alleged that the scheme generated gains totaling nearly $8 million, with a portion of the profits went to the executive through cash payments in India.
Characterizing the Rayapureddy case as encompassing “every kind of insider information” an executive could potentially disclose to outsiders, Rahul Kohlhatkar highlighted that insider trading cases typically involve “some breach of duties” by company directors and officers. Kohlhatkar further pointed out that these cases serve as a reminder of the SEC’s commitment to investigate and charge public company executives who engage in insider trading.
“Off-channel communications” could serve as circumstantial evidence in proving insider trading
On March 30, 2023, the SEC charged Sean Wygovsky, a former trader at a Canadian asset management firm, and Christopher Matthaei, a former partner at a U.S. broker-dealer, for using nonpublic information in advance of at least seven merger announcements involving Special Purpose Acquisition Companies (“SPACs”) to earn alleged illicit profits of more than $3.4 million.5 Notably, the partnership allegedly shared illegal insider information, including the upcoming mergers, partly by communicating through encrypted messaging application Telegram. Kohlhatkar and other panelists warned the audience that circumstantial evidence remains a strong way to prove insider trading, as it is up to the jury to “put pictures together.”
Kohlhatkar’s comment came a week after the agency announced its charges against HSBC Securities (USA) Inc. and Scotia Capital (USA) Inc., both registered broker-dealers, alleging widespread and longstanding failures by both firms and their employees to maintain and preserve electronic communications.6 The SEC’s ongoing investigation identified extensive use of off-channel communications at both firms. As the SEC’s orders described, the firms admitted that their employees often communicated “off-channel” about securities business matters on their personal devices, often using encrypted messaging platforms, such as WhatsApp. Neither firm maintained or preserved the substantial majority of these communications.
Conclusion
In recent years, regulators and law enforcement agencies have been cracking down on insider trading, leading to significant enforcement trends and high-profile prosecutions. It’s important to note that the SEC’s use of data analytics in insider trading and other investigations is part of a broader trend toward using advanced technology and analytics in regulatory oversight. In the modern SEC, advanced algorithms tools are employed to analyze vast amounts of trading data, enabling regulators to pinpoint potential insider trading cases more efficiently than ever before.
1Press Release, Securities and Exchange Commission, SEC Files Multiple Insider Trading Actions Originating from the Market Abuse Unit’s Analysis and Detection Center (July 25, 2022), https://www.sec.gov/news/press-release/2022-129.
2Press Release, Securities and Exchange Commission, SEC Charges Cousins for Insider Trading in Kodak Stock Ahead of Company’s Planned Govt. Partnership to Assist in Response to COVID-19 (February 23, 2023), https://www.sec.gov/news/press-release/2023-38.
3Id. Further details and a roundup of similar cases can be found in a previous article published by V&E.
4Press Release, Securities and Exchange Commission, SEC Charges Pharmaceutical Co. Chief Information Officer in $8 Million Insider Trading Scheme (November 10, 2022), https://www.sec.gov/news/press-release/2022-204.
5Press Release, Securities and Exchange Commission, SEC Charges Hedge Fund Trader and Broker-Dealer Partner in Multi-Million Dollar SPAC Insider Trading Scheme (March 30, 2023), https://www.sec.gov/news/press-release/2023-66.
6Press Release, Securities and Exchange Commission, SEC Charges HSBC and Scotia Capital with Widespread Recordkeeping Failures (May 11, 2023), https://www.sec.gov/news/press-release/2023-91.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.
