SEC v. Rajaratnam, No. 11-5124 (2d Cir. 2019)Annotate this Case
The Second Circuit affirmed the district court's order requiring defendant to pay a civil penalty of almost $93 million in a civil suit brought by the SEC. Defendant was the managing general partner and portfolio manager of Galleon Management and its affiliated hedgefunds. Defendant was found to have executed trades in Galleon's accounts and in the account of Rajiv Goel, an Intel executive who had provided tips to defendant, in the stock of five companies on the basis of inside information.
The court held that a plain reading of Section 21A(a)(2) of the Securities and Exchange Act indicates that it permits a civil penalty to be based on the total profit resulting from the violation. In this case, defendant executed Galleon's and Goel's illegal trades and thus his civil penalty could be calculated under subsection (a)(2) based on the profit gained or loss avoided as a result of defendant's unlawful purchases and sales. The court also held that the district court did not abuse its discretion by determining that every factor in SEC v. Haligiannis, 470 F. Supp. 2d 373, 386 (S.D.N.Y. 2007), favored the use of a treble penalty.