LEGL 2700 Lecture Notes - Lecture 22: Rajat Gupta, Insider Trading, Fiduciary
26 Apr 2018
School
Department
Course
Professor
Insider Trading PBS Film
https://www.pbs.org/wgbh/frontline/film/to-catch-a-trader/transcript/
• Hedge fund: meant to make money in any market
• Mutual fund
• Insider Trading:
o "Insiders"
• Short swing profit rule: if insiders trade their company stock, if
they sell the stock less than 6 months, they have to"discourage
profits"; can't earn profits that are short-term
o Tippees: external parties who received a tip from people on the
inside
• Material nonpublic info (MNPR)
• Exchange/benefit
• Breach of a duty of trust/confidence (tipper had a legal duty to
keep the info confidential then they breached that duty)
• Trade while in possession
• What is insider trading?
o Legal version: when corporate insiders buy and sell stock in their
own companies
• When corporate insiders trade in their own securities, they
must report their trades to the SEC
o Illegal version: buying or selling a security, in breach of fiduciary
duty or other relationship of trust and confidence, while in
possession of material, nonpublic info about the security
• Ex.) tipping info, securities trading by the person "tipped",
securities trading by those who misappropriate info
• Who: Steven A. Cohen- small-time options trader to one of the most
successful hedge fund managers of all time
o Founded SAC Capital
o Made 60% a year
• Cohen charged 3 and 50, meaning 3% of assets under
management and 50% of any gains
• The Players:
o Raj Rajratnam
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