The Securities and Exchange Commission pretty much fell asleep for the past two years. Now, there's talk that the agency plans to get tough on violators whose greed and recklessness took this country to its knees. The Federal Reserve had to pledge or spend $12.8 trillion to bail them out.

The $12.8 trillion is gone and we have a country with 17 million unemployed and underemployed. Fed Chairman Ben Bernanke could have done much better just taking that $12.8 trillion and help those in need. All he had to do was use one good bank for Americans to switch their money into, and let the greedy ones take a hit. With $12.8 trillion Bernanke could have put this country back on its feet again.

As news broke Thursday that a Walt Disney Co. (DIS) executive assistant was arrested on suspicion of selling inside information, speculative investors rushed to buy bearish bets on the Dow component. During the course of the session, traders on the International Securities Exchange (ISE) bought to open 3,807 puts on DIS, compared to just 34 calls that were purchased.

Taking a closer look at the day's put volume, the June 32 strike was most active. This front-month put saw 5,858 contracts change hands on Thursday, with the majority trading at the ask price -- confirming they were purchased. Open interest at this narrowly out-of-the-money strike rose overnight by 4,731 contracts, and now stands at 7,391 open put positions.

When you're looking for stocks to add to your portfolio, a good thing to ask yourself is "What are those who are 'in the know' buying?" These could be analysts, or they could be top stock advisors. The bottom line is that insider buying is sometimes a key indicator of success.

It's not always true, of course, but it's worth noting. So if you're on the fence about Simon Property Group (SPG), Enterprise Products (EPD), CVS Caremark (CVS), DirecTV (DTV) and Dr. Pepper Snapple Group (DPS), you may want to take another look. All have all seen high levels of insider buying lately.

According to The Times Online, Britain's Financial Services Authority (FSA) is looking into insider dealing, launching the biggest operation against such shady tactics ever.

Six men were questioned after the FSA carried out early morning raids on 16 homes and businesses in London, Oxfordshire and Kent. The FSA took documents and computers as part of a joint investigation (with the Serious Organised Crime Agency -- seriously) that started in 2007.

James Altucher is a financial journalist for The Wall Street Journal and founder of Stockpickr.com. His articles cover every angle of the market; he also stars in feature videos with other financial luminaries. He is the author of Trade Like a Hedge Fund, Trade Like Warren Buffett, SuperCa$h, and The Forever Portfolio.

He has taken a controversial path lately with numerous articles in the New York Post and Huffington Post. Some articles include: "Global Warming Is a Myth," "Should Insider Trading Be Made Legal?" "School of Hard Cash," "The Internet Is Dead (as an Investment)," and "5 Myths the Recession Taught Us."

Rumors of a new addition to the James Altucher library have entered the blogosphere, so I met with James to discuss a possible new book and the response from his recent aggressive views on finance and the stock market.

All it takes is a little patience. F. Scott Yeager, a former Enron executive, got some good news from the 5th Circuit Court of Appeals in New Orleans, which ruled that it wouldn't revisit his case. So, he no longer has criminal charges related to financial fraud hanging over him. Yeager has been acquitted on all counts. This follows a June ruling by the Supreme Court, which tossed a previous 5th Circuit Court ruling that could have resulted in a new trial.

The ruling said, "Today, ... it is clear under our initial ... analysis the jury made a finding in acquitting Yeager that precludes prosecution on insider trading and money laundering." Samuel Buffone, who was one of Yeager's attorneys, stated that his client shouldn't have been indicted to begin with and didn't do anything wrong. It has taken them seven years to get to this point.

Yeager landed in hot water because he sold stock in Enron for more than $54 million before it began the plunge that would ultimately end with its bankruptcy in 2001. He faced 125 counts, was acquitted of five (four for wire fraud and one for conspiracy to commit wire and securities fraud) and wound up with a hung jury for the remaining 120, which included insider trading and money laundering. He was later indicted again on 13 counts of insider trading and money laundering.

On Wednesday, Galleon Group founder Raj Rajaratnam told employees via letter that the company is going to wind down all of its hedge funds. In a Wall Street Journal article (subscription required), a person familiar with Galleon said that one of the alternatives the company is exploring is selling out to another firm.

These alternatives were approached by Rajaratnam in his letter, as he told employees that it is "in the best interest of our investors and employees to conduct an orderly wind down of Galleon's funds while we explore various alternatives for our business."

So, I was flipping through some articles in Rolling Stone, when I found a very interesting economic story - yes, in Rolling Stone. The article, "Wall Street's Naked Swindle," takes a look at what happened in the options pits leading up to the death of Bear Stearns and Lehman Brothers. According to the article, an unknown option buyer made "one of the craziest bets Wall Street has ever seen," by shorting Bear Stearns. The unknown trader felt that Bear Stearns would lose "more than half" of its value in nine days or less, a bet that one financial analyst likened to buying 1.7 million lottery tickets.

What is crazy is that this bet paid off, leading to only one conclusion: insider trading (cue dramatic music). When Bear Stearns dropped from roughly $63 to $2 per share on March 17th (just six days later), the person purchasing the options made roughly $270 million. Senator Chris Dodd from the Senate Banking Committee thought that something wasn't on the up and up with this trade, and the Securities and Exchange Commission (SEC) promised it would look into the trade. Of course, nothing has happened since.

Raj Rajaratnam's life has just changed profoundly. The 52-year-old founder, fund manager, and partner at the Galleon Group has been accused of insider trading, conspiring with others (now named as defendants with him) to trade shares of Google (NASDAQ: GOOG), Hilton (OTC: HLNQ), and Sun Microsystems (NASDAQ: JAVA), among others. Rajaratnam generated $25 million in profits on these trades, but that's moot now.

Rajaratnam, who is #559 on the list of the world's richest people, with a net worth of $1.3 billion, now faces fines of up to $250,000 and from 5 to 20 years in prison. I doubt he'll be in the same slot on next year's list of billionaires.

The market has made a nice rebound in recent months, instilling confidence in investors that the worst is over.

But there's at least one negative indicator: Insiders are dumping stock. Charles Biderman of market research firm Trim Tabs tells Fortune that there were $31 worth of insider stock sales for every $1 in buying during the month of August. Worse, this comes at a time when public companies are raising money through stock offerings while putting the brakes on the share buybacks that were giving a boost to the stock market until the recent bear market.

Mary Schapiro, chairperson of the the SEC, wants to collect critical data on derivatives transactions to pursue market abuses.

Schapiro said that regulators need the data to construct an audit trail to find out who is doing insider trading and market manipulation. The U.S. Senate is investigating the derivatives markets but is up against a brick wall because it cannot pin down who it is that actually pulled the trigger on the trades. So they are relying on the SEC to provide this data. Schapiro said that the SEC is having difficulty identifying derivative investors and the size of their trades.

Do you remember Countrywide Mortgage? Just before the subprime debacle, Countrywide was one of the biggest players in the mortgage business. A man named Angelo Mozilo became chief executive. The company was on a roll. Its motto was "let's think outside the box." And it did.

Countrywide was the first to process applications by computer. Then it let the computer assign a credit score. Then, in a bizarre move, if the credit score was too low, Countrywide just tacked on a few more percentage points to the interest on the mortgage.

Pequot Capital Management is coming to an end, closing the book on two decades of hedge fund history. Arthur Samberg, at one point the biggest hedge fund manager in the world, is closing the company as a result of a Securities and Exchange Commission (SEC) insider trading investigation.

At its peak in 2001, Pequot had $15 million in assets under management. By November 2008, it was only $4.3 billion ... and $3.47 billion as of May 15, 2009, according to a regulatory filing.

Can you believe this! The Securities and Exchange Commission is investigating its own employees. It's gotten so bad that the SEC had to establish new rules for employee trading. Right now the SEC has at least two employees under investigation for possible insider trading. The FBI had to be notified and may also be called in to conduct investigations of possible insider trading.

Would you believe that employees can trade the stocks of companies they are investigating? Yes, as of now that's true. So guess what the SEC is doing to correct the problem? They will employ an outside firm to track employee trading in real time. Another new rule will be that employees cannot trade stocks of companies under investigation and will require them to get clearance before making any trade. From this we can infer that employees have been trading stocks of companies under investigation right along.

General Motors (NYSE: GM) disclosed yesterday that it had borrowed another $4 billion from the Treasury Department, raising its total indebtedness to us to $19.4 billion.

The New York Times reports that "G.M. originally said that it would need an additional $2.6 billion from the government to operate through June 1, but added $1.4 billion to that amount."

Whoops! GM underestimated its cash needs by an astounding 53.8%!