U.S. SEC drops insider trading charge against Gupta

Vittorio Hernandez – AHN News

Washington, DC, United States (AHN) – The U.S. Securities and Exchange Commission on Thursday dropped insider trading charges against Rajat Gupta, the former board member of Goldman Sachs and leader of McKinsey and Company.

The action was the result of a lawsuit filed by Gupta against the regulator. Gupta said his rights were breached because the SEC filed the case against him in an administrative forum, instead of a federal court. He argued that he would have more legal protection and the right to a trial by a jury in a federal court trial.

However, the SEC said it reserved the right to file similar charges against Gupta in federal court. The SEC said it is fully committed to the case and will proceed with filing a case against the former Goldman Sachs official.

The administrative proceeding, which the SEC began in March, was over Gupta’s alleged passing of insider information to Raj Rajaratnam, co-founder of Galleon Group, about Goldman Sachs and Procter and Gamble, where Gupta also served as director.

The SEC claimed that Gupta provided Rajaratnam information about the $5 billion investment of Berkshire Hathaway in Goldman Sachs and disclosed the quarterly earnings of Goldman Sachs and Procter and Gamble.

The federal court lawsuit would be heard by U.S. District Judge Jed Rakoff, who ruled last month that Gupta could argue that the SEC singled him out for unfair treatment since all the 28 other SEC lawsuits related to the Galleon insider trading cases were filed in federal court.

Rajaratnam was previously found guilty of 14 criminal counts of conspiracy and securities fraud in May and is awaiting sentencing.

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