The regulator had accused Mayank Gupta of tipping off his cousin-in-law, Pushpendra Agrawal, about an impending acquisition after learning about it through his audit work.
He called Agrawal and told him that the acquisition of QLogic Corp by Cavium – both California-based businesses – was “a sure thing”.
As soon as he arrived at work, Agrawal bought 200 QLogic call options, based on Gupta’s tip. During his lunch break, he bought a further 50 call options. So, when QLogic made its acquisition by Cavium public and QLogic’s shares rose by over 9%, Agrawal made more than $23,785 (£18,000) from his illegal trades.
The pair neither admitted nor denied the SEC’s complaint but agreed to settle the case. Gupta paid a civil penalty of $23,785, while his cousin-in-law, who cooperated with the SEC in its investigation, paid a total of $36,641 which included the illegal profits he had made plus interest and a penalty of $11,892.
Both men agreed to permanent injunctions against further violations of the charged provisions of the federal securities laws.