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An evil of Insider Trading- RAJAT GUPTA

- Stock market scam

Made by:- TARUN CHAWLA

Roll no. :- Cun120551017

FTKMC

CHITKARA BUSINESS SCHOOL

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Rajat Gupta -first Indian-born CEO of a Global

Western Company

Name - Rajat Kumar Gupta

Birth date - December 1948 (age 63)

Birth Place - Kolkata, West Bengal, India

Residence - Westport, CT, USA

Ethnicity - Indian American Citizenship - United States

Education - Mechanical engineering, IIT Delhi

- Harvard Business School

Occupation - Consultant, Management expert Years active - 1973-2007

Employer - McKinsey & Company, Inc.

Net worth - $100 million

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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

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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 andLata Krishnan,

New Silk Route with Parag Saxena and

Victor Menezes, and Scandent with Ramesh Vangal.

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Rajat Gupta Criminal Case

Criminal charge - Conspiracy, securities fraud

He was convicted in June 2012 on insider trading

charges stemming from the Raj Rajaratnam GalleonGroup case on four criminal felony counts of

conspiracy and securities fraud

Criminal penalty - Sentencing pending (Oct 17` 2012)

Criminal status - Convicted, appeal pending

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Business Concept

Rajat Guptas Case

On March 1, 2011, the SEC filed an administrative civilcomplaint against Gupta for insider trading with

billionaire and Galleon Group founder Raj Rajaratnam.

On October 26, 2011 the United States Attorney's Officefiled criminal charges against Gupta. He was arrested inNew 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&Ginformation was added by the prosecution

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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 countof conspiracy. He was found not guilty on two

other securities fraud charges.

Sentencing is scheduled for 17 Oct 2012 .

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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 millionsof dollars trading on his tips.

He was acquitted of two counts of securities fraud,

including the only one relating to P&G.

Rajat Guptas Case

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Insider trading and their evils

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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.

Two aspect of the problem:

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.

.

Insider trading

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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.

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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.

Few examples of Insiders Information

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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.

Example

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ALLEGATIONS

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

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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.

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