Financial Regulatory Forum

Gupta insider case puts focus on monitoring board members, financial-crisis challenges

Rajat GuptaBy Julie DiMauro and Stuart Gittleman

NEW YORK, June 18 (Thomson Reuters Accelus) - The insider-trading conviction of Rajat Gupta, a former McKinsey group chairman and a-list board member, had federal prosecutors and securities regulators glowing. But companies face stiff challenges protecting their boards from breaches confidentiality by directors and the reputational and other damages that ensue, consultants and lawyers said.

The conviction also draws a contrast with the relative lack of high-level prosecutions stemming from the 2008 financial crisis, which analysts said was rooted in practices harder to establish a case on.  (more…)

SEC’s boardroom bombshell: directors can be costly

Traders work in the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2010.  REUTERS/Brendan McDermidNEW YORK, March 4 (Westlaw Business) Being an insider with a fiduciary duty sure is risky, as heavyweight Rajat Gupta is now finding out amidst serious SEC charges. So is having board members, as Goldman Sachs and Procter and Gamble are now worrying. Of great concern to each are the reputational risks and attendant costs that this might impose on them. The potential risks could relate to a broad range of issues, ranging from inside information, to disclosure of SEC investigation and board member protection. Though this likelihood may seem remote, recent experiences from Bank of America to Goldman Sachs itself show them to be painfully possible.

With a plot literally ripped from the headlines and a narrative crackling like a Law & Order script, the Commission has charged Gupta in the spreading Galleon insider trading scandal. The case links Berkshire Hathaway, Goldman Sachs and Procter and Gamble (P&G) to what is shaping up to be one of the biggest non-Madoff financial crime stories of the young century. (more…)

Why U.S. inside traders escape harsh sentences

US Courthouse, New YorkBy Andrew Longstreth

NEW YORK, Jan 6 (Reuters Legal) – The recent flurry of insider-trading arrests by the Manhattan U.S. Attorney has set Wall Street on edge. But if recent history is any guide, people found guilty of that crime tend to get off relatively easy, a Reuters Legal analysis suggests.

The analysis covers sentences imposed in 2009 and 2010 in 15 insider-trading cases brought by the U.S. Attorney in New York, representing virtually all those imposed in that court during this period. Of these, 13 sentences, or nearly 87 percent, were lighter than the terms prescribed by the U.S. Sentencing Guidelines — and seven of the sentences carried no prison time at all. The data from 2009, culled from a report issued last year by law firm Morrison & Foerster, reveal that only one prison term, for 63 months, was issued for insider trading in 2009.

The routine practice of departing downward from the guidelines in insider-trading cases is particularly striking given the much lower rate at which judges in the New York federal court typically do so. According to U.S. Sentencing Commission statistics from fiscal 2009, New York federal judges departed downward from the guidelines in 57 percent of all cases, a full 30 percentage points lower than for insider-trading cases alone. (more…)

New arrests in Galleon insider-trading case

NEW YORK, Nov 5 (Reuters) – Nine more people have been arrested in the Galleon Group insider-trading scandal, bringing to 15 the number charged in the biggest hedge fund-related case in history.

(more…)

  •