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Transcript of INSIDER TRADING
Gupta was a director of many different,
well-known, powerful businesses.
Because of Rajat Gupta's broad range of consulting experience, he was honored
with the highest trust by mentioned above companies.
Rajat Gupta’s actions with regards to his duties as a director
As a director Gupta should have remained loyal
to the company and avoid conflicts of interest.
He was obliged to display a high standard of care, skill or diligence and act in good faith to promote the success of the corporation.
He violated Sections 16(b) and 10(b) of the Securities Exchange Act of 1934 and Regulation FD regarding Fair Disclosure.
According to Code of Ethics and Standards of Professional Conduct, he violated Standard II(A) about revealing Material Nonpublic Information,
which indicates Gupta's lack of self-control.
Voluntary versus forced resignation when a director faces litigation
Gupta voluntary resigned from the Boards of Directors.
Not every director resigns willingly.
Therefore the board should consider adopting a "fitness to serve" protocol, which will help to deal with cases when board's fiduciary credibility is at stake.
The board can require that the director agrees to step down at the request of the governance committee.
Such policies will help in case the director is not willing to step aside on his/her own and they clarify the rules.
2.Definition of insider trading
4.Discussing Rajat Gupta's multiple directorship
5.Gupta's duties as a director
6.Voluntary vs. forced resignation in case of litigation
7.Reaction of companies involved in case
8.Similar cases in Poland
This term that can refer both to legal and illegal conduct:
-legal: when corporate insiders, i.e. officers, directors, and employees, buy and sell stock in their own companies, using material, public information,
-illegal:when the information used is nonpublic.
CFA Institute in its Standards of Professional Conduct, followed by CFA charter holders, forbids using or making others use material, nonpublic information .
Financial market start to resemble a casino game, where the players play using marked cards, so that they can earn a lot of money.
by Kasia Fiołek & Marta Kossakowska
Rajat Gupta- accussed
in the insider trading case:
Indian American businessman,
highly respected on the Wall Street,
he sat on boards of Goldman Sachs,
Procter&Gamble, Genpact Limited
Rajat Gupta and Raj Rajaratnam became
Rajarantnam founded Galleon Group-large
hedge fund management firm.
Gupta invested money in Galleon's funds.
Gupta was providing Rajarantnam with material, nonpublic information regarding companies
that he worked for.
Both men were sentenced to prison and ordered
to pay a fine.
At the same time Gupta could obtain first-hand, non-public information which he could use to his own advantage.
CONFLICT OF INTEREST:
directors should report even potential conflicts of interest to the Board of Directors.
Were companies' reactions really in the best interest of shareholders? Disclosure of information to public and shareholders.
Gupta decided to resign voluntary from all of the boards that he was a member of.
McKinsey Company which published an official statement: end of professional relationship with Rajat Gupta.
P&G Board of Directors that they were going to open an investigation against Gupta, they decided not to reveal it to shareholders since it was not material one.
Public companies should be more open and honest with investors and shareholders by providing fuller disclosures.
Similar cases reported in Poland
The first insider trading charge was proven in year 2005:
Marek Owczarek,the chairman of a public company Suwary, before announcing good results of his company for the second quarter of year 2004, had bought Suwary's shares and realized a profit.
The court ordered him to pay a fine of 100 thousand PLN for using material, non-public information.
The person accused of using material, non-public information can be sentenced to prison for period from 3 months to even 5 years and can be ordered to pay a fine up to 5mln PLN .