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July 31, 2013updated 04 Apr 2017 3:01pm

SEC charges tipper in SAC insider trading case

The Securities and Exchange Commission has charged the tipper of confidential information to a S.A.C. Capital portfolio manager who has been charged with insider trading.

By Verdict Staff

The Securities and Exchange Commission has charged the tipper of confidential information to a S.A.C. Capital portfolio manager who has been charged with insider trading.

The SEC has amended its complaint against Richard Lee, who was charged last week, to additionally charge Sandeep Aggarwal, a sell-side analyst who tipped Lee in advance of a July 2009 public announcement about an Internet search engine partnership between Microsoft and Yahoo.

Lee purchased large amounts of Yahoo stock in the S.A.C. Capital hedge fund that he managed as well as in his personal trading account on the basis of the inside information.In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Aggarwal, who lives in India but recently returned to the US.

Sanjay Wadhwa, senior associate director of the SEC’s New York regional office, said: "Rather than rely on legitimate research methods, Aggarwal obtained confidential information from a close friend at Microsoft and passed it along to Lee knowing that he would likely trade on it."

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, Yahoo’s stock price rose approximately 4%.

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.

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.

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