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An evil of Insider Trading- RAJAT GUPTA

- Stock market scam


Rajat Gupta -first Indian-born CEO of a Global Western Company

Name Birth date Birth Place Residence Ethnicity Citizenship Education Occupation Years active Employer Net worth Rajat Kumar Gupta December 1948 (age 63) Kolkata, West Bengal, India Westport, CT, USA Indian American United States Mechanical engineering, IIT Delhi
Harvard Business School

Consultant, Management expert 1973-2007 McKinsey & Company, Inc. $100 million

Corporate chairman, board director or strategic advisor to a variety of large and notable organizations: Goldman Sachs, Procter and Gamble American Airlines non-profits including The Gates Foundation, The Global Fund and the International Chamber of Commerce

Rajat Gupta is additionally the co-founder of four different organizations: The Indian School of Business with Anil Kumar, The American India Foundation with Victor Menezes and Lata Krishnan, New Silk Route with Parag Saxena and Victor Menezes, and Scandent with Ramesh Vangal.

Rajat Gupta Criminal Case

Criminal charge - Conspiracy, securities fraud He was convicted in June 2012 on insider trading charges stemming from the Raj Rajaratnam Galleon Group case on four criminal felony counts of conspiracy and securities fraud Criminal penalty - Sentencing pending (Oct 17` 2012) Criminal status - Convicted, appeal pending

Rajat Guptas Case Business Concept

On March 1, 2011, the SEC filed an administrative civil complaint against Gupta for insider trading with billionaire and Galleon Group founder Raj Rajaratnam.
On October 26, 2011 the United States Attorney's Office filed criminal charges against Gupta. He was arrested in New York City by the FBI and pleaded not guilty. He was released on $10 million bail on the same day In April 2012, another charge relating to passing P&G information was added by the prosecution

Rajat Guptas Case

Rajat Gupta's trial began on May 21, 2012.[70] On June 15, 2012, Gupta was found guilty on three counts of securities fraud and one count of conspiracy. He was found not guilty on two other securities fraud charges.

Sentencing is scheduled for 17 Oct 2012 .

Rajat Guptas Case

Mr. Gupta was convicted on three counts of securities fraud and one count of conspiracy for passing along confidential boardroom information about Goldman to a hedge fund that earned millions of dollars trading on his tips. He was acquitted of two counts of securities fraud, including the only one relating to P&G.

Insider trading and their evils

Insider trading
Insider information is information (about company strategy and plans) that someone within a company has but that is not available to those outside the company. The moral problems connected with insider information concern the use that individuals may make of such information while they are still members of the firm. One is that of some one within the firm using information for his or her private gain, at the expense of the firm. This is called conflict of interest . The other is the use of insider information by someone within a firm advantage over those not in the firm.

Two aspect of the problem:

Insiders of the company

Insiders need not be the person who is directly connected to the company because of their position or otherwise. SEBI has defined insider as a person connected to or deemed to be connected and has reasonable connection with unpublished price sensitive data of the company.

Few examples of Insiders Information

Periodical financial results Intended declaration of dividends Issue of securities by way of public/right/bonus etc Major expansion plan or execution of new project Amalgamation/merger or takeover, Disposal of whole or substantial part of undertaking, Any significant change in policies, plans or operations of the company.

Insider trading where a company director knows that the company is in a bad financial state and sells his shares in it knowing that in a few days time this news will be made public together with an announcement of a cut in dividend payment.


On June 16 Goldman Sachss stock price up more than 2%, Rajaratnam caused the Galleon Tech funds to sell the June $170 call option contracts they had purchased on June 11, generating profits of approximately $7 million. On June 17, Goldman Sachs announced its quarterly results. Revenues and earnings per share beat analysts estimates, and Goldman Sachss share price opened the day at $185.04 per share about 1.62% higher than the prior days closing price of $182.09 per share

After the announcement, Rajaratnam caused the Galleon Tech funds to sell the Goldman Sachs shares they had purchased after Rajaratnam received the material nonpublic information from Gupta on June 10, generating profits of over $6.6 million. The total illicit profits made by the Galleon Tech funds by virtue of their trading based on Guptas material nonpublic information concerning Goldman Sachss second quarter of 2008 results exceeded $13.6 million.