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SEC imposes huge penalty on Rajat Gupta

July 18, 2013 09:00 IST

The Securities and Exchange Commission on Wednesday asked former Goldman and Sachs director Rajat Gupta to pay a $13.9 million penalty for ‘illegally tipping corporate secrets’ to former hedge fund manager Raj Rajaratnam now serving jail sentence.

SEC imposes huge penalty on Rajat Gupta. Photograph: Lucas Jackson/ReutersGupta, who was found guilty by a Manhattan federal court last year and sentenced to two years in prison, has also been permanently barred from serving as an officer or director of a public company.

Gupta is free pending his appeal to the decision to the Second Circuit Appeals Court.

"The sanctions imposed today (Wednesday) send a clear message to board members who are entrusted with protecting the confidences of the companies they serve,"  said George S Canellos, co-director of the SEC’s Division of Enforcement. "If you abuse your position by sharing confidential company information with friends and business associates in exchange for private gain, you will be prosecuted to the fullest extent by the SEC."

The SEC previously obtained a record $92.8 million penalty against Rajaratnam for prior insider trading charges.

In its complaint filed in 2011, the SEC alleged that Gupta disclosed confidential information to Rajaratnam about Berkshire Hathaway Inc's $5 billion investment in Goldman Sachs as well as 'nonpublic details' about Goldman Sachs’s financial results for the second and fourth quarters of 2008.

In addition to imposing the civil penalty, the order issued Wednesday by the US District Court for the Southern District of New York enjoins Gupta from future violations of the securities laws, and permanently bars him from acting as an officer or director of a public company, and from associating with any broker, dealer, or investment adviser.

Suman Guha Mozumder in New York