Rajat Gupta Case p3e5x

Rajat Gupta’s case

& Evils of Insider trading

Rajat Gupta -First Indian-born CEO of a global Western company Name - Rajat Kumar Gupta Birth date - December 1948 (age 63) BirthPlace - Kolkata, West Bengal, India Residence - Westport, CT, USA Ethnicity - Indian American Citizenship - United States Education - Alma mater IIT Delhi Harvard Business School Occupation - Consultant, Management expert Years active 1973-2007 Employer - McKinsey & Company, Inc. Net worth - $100 million

Rajat Gupta -First Indian-born CEO of a global Western company 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 -First Indian-born CEO of a global Western company • 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’s Criminal Background • 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 Gupta’s Case On March 1, 2011, the SEC filed an istrative 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 ing P&G information was added by the prosecution

Rajat Gupta’s 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 Gupta’s Case • Mr. Gupta was convicted on three counts of securities fraud and one count of conspiracy for ing 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 of the firm. • Two aspect of the problem: 1. 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 2. The other is the use of insider information by someone within a firm advantage over those not in the firm. .

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.

Evils of Insider Trading • Directors/CEOs/Large shareholders/managers/workers • Independent non-executive directors, It includes a person who is a connected person six months prior to an act of insider trading • Share Transfer Agents/registrar to an issue, • Investment company/trustee company, • Subsidiary of a company and relatives of connected persons, • Asset management company, • Merchant banker/debenture trustee/ broker/subbroker, • Portfolio manager/investment adviser/analysts • ancy firms, law firms/consultants Or an employee thereof

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.

Example • 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.

• Likewise, the director would be insider dealing if, on being informed before it was generally known by the public, that the company has discovered oil or gold on its own land, he bought more shares in the company in the not unrealistic expectation of an increase in their market value as a result of the subsequent public announcement.

The Sebi Act • Insider trading is an evil by which any stock market is infected to cause grave damage to the common investor. • It erodes the confidence of the investor and undermines its credibility. It is often said that insider trading is not as rampant in any other stock market in the world as in the Indian market. By the promulgation of the Securities and Exchange Board of India (Insider Trading) Regulations, 1992 ("the Regulations"), Sebi attempted to give a concrete shape, by a legislative measure, to one of the specific functions which s.11 of the Securities and Exchange Board of India Act, 1992 ("the Sebi Act") requires Sebi to discharge. The object of this measure is to prevent and curb the menace of insider trading in shares.

Who Is Affected by Insider Trading? • Insiders - officers, directors, and other key employees of a firm • Market professionals - informed non insiders, including securities analysts, brokers, or arbitrageurs, • liquidity traders - sometimes referred to as “noise” traders, are short-term stock market participants • Investors - small or large shareholders