When life mirrors art, the results are sometimes devastating. The story and trial of Rajat Gupta, the Wall Street corporate director recently convicted of insider trading, reminded us strongly of our Think Twice video series for insider-trading prevention and education. In the two vivid, professionally acted dramas of the three-part series, employees of fictional companies get into trouble not only for trading shares on confidential company information but also, like Mr. Gupta, for passing secret company news to others who financially gain from it. Mr. Gupta's conviction included a count of conspiracy for tipping off a hedge fund with confidential boardroom information about the investment bank Goldman Sachs, where he was a director. As the Think Twice videos make clear, insider tipping is as illegal as actually trading on confidential inside information.
One of the striking things about the trial of Mr. Gupta was the circumstantial evidence that led to his conviction. Circumstantial evidence was once more common in insider-trading prosecutions, before federal authorities began favoring more direct methods such as wiretapping to gather evidence against insider-trading suspects. Mr. Gupta's trial is a reminder that a sufficient accumulation of indirect evidence can still lead to prosecution and conviction on charges of insider trading and tipping. Indeed, the case may cause federal prosecutors to feel once again more confident about bringing insider-trading charges on merely circumstantial evidence.
However it is detected and prosecuted, insider trading is a serious issue for companies and their employees. Our Think Twice video series helps the many companies that use it to educate their workforce about the perils of insider trading and tipping and how to avoid making the kinds of mistakes that, whether intentional or not, can ruin lives. More educational material about insider-trading prevention, with specific reference to stock compensation, can be found in the section SEC Law at myStockOptions.com.
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