SEC Charges ‘Tipper’ in SAC Capital Insider Trading Case

As a sell-side analyst, “Aggarwal knew the rules and yet he broke them, which is why he joins the growing ranks of those held accountable by the SEC for insider trading,” Wadhwa said.

The SEC alleges that Aggarwal learned confidential details about the significant progress of the Microsoft-Yahoo negotiations from his close friend at Microsoft on July 9, 2009, and he tipped Lee with the information during a telephone call the following day.

“When the information was reported in the media almost a week later, Yahoo’s stock price rose approximately 4%,” the SEC says. “SAC Capital and Lee reaped substantial profits from the Yahoo shares that he purchased after speaking to Aggarwal.”

According to the SEC’s amended complaint filed in federal court in Manhattan, Aggarwal covered both Microsoft and Yahoo for his research firm and regularly received periodic updates from his inside source at Microsoft. “Upon learning that Microsoft and Yahoo were potentially within two weeks of finalizing a deal, Aggarwal shared very specific details with Lee,” the SEC states. “Aggarwal assured him that the information came from a close friend at Microsoft who was reliable and accurate.”

The SEC’s amended complaint charges Aggarwal and Lee with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The amended complaint seeks a final judgment ordering Aggarwal and Lee to pay disgorgement of ill-gotten gains plus prejudgment interest and financial penalties, and permanently enjoining them from future violations of these provisions of the federal securities laws.