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October 29, 2012 at 06:06 AM
Late last week, the Securities and Exchange Commission (SEC) levied two separate insider trading enforcement actions—one against a former senior executive at a Silicon Valley technology company for illegally tipping convicted hedge fund manager Raj Rajaratnam with nonpublic information, and another against an insurance company CEO for relaying confidential information he obtained in advance of a private investment firm acquiring a significant stake in a Denver-based oil and gas company.
In the first case, the SEC alleges that Kris Chellam tipped Rajaratnam in December 2006 with confidential details from internal company reports indicating that Xilinx Inc. would fall short of revenue projections it had previously made publicly. The tip enabled Rajaratnam to engage in short selling of Xilinx stock to illicitly benefit the Galleon funds, making nearly $1 million in illicit profits.
According to the SEC, “Chellam tipped Rajaratnam, who was a close friend, at a time when Chellam had his own substantial investment in Galleon funds and was in discussions with Rajaratnam about prospective employment at Galleon. Chellam was hired at Galleon in May 2007.”
Chellam, who lives in Saratoga, Calif., has agreed to pay more than $1.75 million to settle the SEC’s charges. The settlement, the SEC says, is subject to court approval.
“Chellam was entrusted with sensitive company information that he divulged to Rajaratnam knowing full well that Rajaratnam would trade on it,” said Sanjay Wadhwa, associate director of the SEC’s New York Regional Office and Deputy Chief of the Enforcement Division’s Market Abuse Unit. “Corporate executives who exploit company confidences for personal gain will ultimately be held accountable for their illegal acts.”
The SEC notes that since October 2009, the agency has filed a substantial number of insider trading actions, charging more than 400 individuals and entities. The defendants in these actions are alleged to have made more than $600 million in illicit gains comprised of profits and the avoidance of losses.
