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Rajat K. Gupta, Insider Trading

Rajat K. Gupta, Insider Trading. Max Andrews. Background . Born in Kolkata, India Father died when he was age 16 Mother died at age 18 Attended Modern School in New Delhi Ranked 15 th in the nation in the entrance exam for IIT

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Rajat K. Gupta, Insider Trading

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  1. Rajat K. Gupta, Insider Trading Max Andrews

  2. Background • Born in Kolkata, India • Father died when he was age 16 • Mother died at age 18 • Attended Modern School in New Delhi • Ranked 15th in the nation in the entrance exam for IIT • Obtained his Bachelors degree in mechanical engineering from Indian Institute of technology, Delhi in 1971 • Received an MBA from Harvard Business School in 1973

  3. Insider Trading • The illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information. • Insider trading is illegal because it’s a form of securities fraud, and fraud is viewed as larceny or theft • Insider trading is not a victimless crime. All stakeholders are effected.

  4. Goldman Sachs and McKinsey & Company Goldman Sachs McKinsey & Company Global management consulting firm. Solves issues regarding concerns to senior management. Serves as an adviser to major businesses, government and institutions worldwide. Provides companies with advise that can be considered very important information. • Multinational investment banking firm. • Provide investment banking, securities, investment management and financial services. • Also provides merger, acquisition and asset management advice. • Executives are exposed to very sensitive information

  5. Raj Rajaratnam • Sri Lankan-American former hedge fund manager and founder of Galleon Group. • Rajat Gupta allegedly told Raj Rajaratnam about a five billion dollar purchase by Warren Buffet’s Berkshire Hathaway of Goldman preferred stock. • Raj Rajaratnam conspired to obtain the information through Rajat Gupta before it went public. • Raj Rajaratnam was reported to have wanted to cooperate with law enforcement by wearing a wire to tape insider information discussions with Gupta. • All the evidence against Rajat Gupta was circumstantial.

  6. How is this Insider Trading? • The Goldman Sachs director was claimed to have been the leader in leaking out the bank’s boardroom secrets to Raj Rakaratnam. • Gupta was the most prominent corporate executive in this case which led to 79 convictions and not a single loss. • Raj Rajaratnam reportedly made approximately $60 million dollars on insider information. • This leaves a permanent scar on Raj K. Gupta’s reputation and also hurts Goldman Sach’s credibility as an investment bank.

  7. How to avoid insider trading • Watch what kinds of questions you ask when receiving information on securities. • Always check your sources. • Report to the proper authorities when you receive information relevant to your portfolio that you’re not sure is public. • If you are hearing information you shouldn’t be hearing, report it because you could be charged with conspiracy. • Make sure you only trade with people who are clear on insider trading policies. • Watch how you repay favors.

  8. Citations • "What Is Insider Trading and How to Avoid It – Definition, Laws & Cases." Money Crashers. SparkCharge Media, 1 Jan. 2014. Web. 28 Apr. 2014. <http://www.moneycrashers.com/what-is-insider-trading-definition-laws-cases/>. • Protess, Ben. "Federal Court Rejects Gupta’s Appeal for New Trial." New York Times. N.p., 25 Mar. 2014. Web. 28 Apr. 2014. <http://dealbook.nytimes.com/2014/03/25/court-rejects-rajat-guptas-appeal/>.

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