Assignment: Insider Trading Analysis

Assignment: Insider Trading Analysis

Assignment: Insider Trading Analysis

Rajat Gupta is an Indian American businessman who was the managing director of management consultancy McKinsey & Company and a business leader in India and the United States. Rajat Gupta also served as corporate chairman, board director or strategic advisor to Goldman Sachs, Procter and Gamble and American Airlines, and non-profits organizations, The Gates Foundation, The Global Fund and the International Chamber of Commerce. Assignment: Insider Trading Analysis

Rajat Gupta was convicted in June 2012 on insider trading charges. He was sentenced in October 2012 to two years in prison, an additional year on supervised release and ordered to pay $5 million in fines. His trial began on May 22, 2012. On June 15, 2012, Gupta was found guilty on three counts of securities fraud and one count of conspiracy.

The primary parties are affected are Rajat Gupta, McKinsley & Company, Goldman Sachs, Raj Rajaratnam, Galleon Group, Warren Buffet, and the U.S. equity markets. Other parties indirectly affected are family and friends of Rajat Gupta, employees at McKinsley & Company and Galleon Group, investors in Goldman Sachs and its creditors, and government and officials involved with the case.

The Transactions

In September 2008 Warren Buffet agrees to pay $5 billion to Goldman Sachs in exchange for preferred shares in the company. This news is likely to raise the share price of Goldman Sachs. The news is not supposed to be announced and made public until the end of day. Less than a minute after the board approved the Buffet purchase, Rajat Gupta calls his longtime friend Raj Rajaratnam, a hedge fund manager and billionaire founder of Galleon Group. Once Rajaratnam gets this information, he immediately buys shares of Goldman Sachs. Next day when the stock market opens, Raj Rajaratnam makes nearly $1.2 million in profits as Goldman Sachs shares rose. The SEC estimates the tip leaked by Rajat Gupta generates profits and avoids losses of more than $23 million.

Ethical Analysis

According to moral perfectionism, how should we judge Rajat Gupta’s action?

I’d like to introduce my understanding of the incident. Rajat Gupta through leak the business secret of Goldman Sachs, make himself generates profits and avoids losses of more than $23 million. From a certain perspective, it is a kind of illegal behavior, many companies affected, also to his friends, family, and even his as a business idol, also caused the unrest. But according to moral perfectionism, that right action as a constitutive a aspect of the highest good (“happness”or”well being”). Right action is action worth doing for its own sake. As a businessman and an executive, I think for the benefit of the company, it is worth doing. Assignment: Insider Trading Analysis