INSIDER TRADING CASE SETTLED WITH DISGORGEMENT AND INTEREST

The following excerpt is from the SEC website:

“The Securities and Exchange Commission announced today that on June 8, 2011, The Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York, entered a judgment against Gautham Shankar in SEC v. Cutillo et al., 09-CV-9208, an insider trading case the SEC filed on November 5, 2009. The SEC charged Shankar, who was a registered representative and a proprietary trader at the broker-dealer Schottenfeld Group, LLC during the relevant time period, with using inside information to trade ahead of the June 4, 2007 announced acquisition of Avaya Inc. and the September 28, 2007 announced acquisition of 3Com Corp.
In its complaint, the SEC alleged that Arthur Cutillo, a former attorney with the international law firm of Ropes & Gray LLP, misappropriated from his law firm material, nonpublic information concerning the acquisitions of 3Com and Avaya, and tipped the inside information, through another attorney, to Zvi Goffer, a proprietary trader at Schottenfeld, in exchange for kickbacks. The SEC further alleged that Goffer tipped the inside information to Shankar, who traded in the securities of Avaya and 3Com based on that information. The SEC also alleged that Shankar passed the 3Com tip to his friend, a portfolio manager at a hedge fund advisor, which also traded on this inside information.
To settle the SEC’s charges, Shankar consented to the entry of a judgment that: (i) permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders him to pay disgorgement of $111,521, plus prejudgment interest of $13,292. The judgment further provides that upon motion by the SEC, the Court later will determine issues relating to a civil penalty. In a related SEC administrative proceeding, Shankar consented to the entry of an SEC order barring him from association with any investment adviser, broker, dealer, municipal securities dealer, or transfer agent. Shankar previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud in a related criminal case, United States v. Gautham Shankar, 10-CR-996 (S.D.N.Y.), and is awaiting sentencing.
The SEC also announced today the entry of a judgment against Shankar in a separate case alleging insider trading in other securities.”