The SEC has announced today that it has charged a senior portfolio manager at Microsoft and his friend/business partner with insider trading.
The government agency states that Brian D. Jorgenson received confidential information ahead of the official Microsoft announcement and then sent this information to Sean Stokke. Stokke then executed trades with this information provided to him by Jorgenson and the two split the profits in their brokerage accounts.
If true, this is a classic example of insider trading with an internal employee obtaining sensitive financial information ahead of the public announcement and providing it to an outside source who can then hedge against the announcement.
Traditionally, internal employees who are privy to this information are required to enter a ‘blackout window’ where they are not allowed to buy or sell company stock until after the financial information is made public. The ‘blackout window’ typically covers a few weeks before a earnings are released and is designed to not allow executives to make trades before the information is public.
The Seattle times was able to obtain more information about the case which says that Jorgenson gave out sensitive information three times in the last 18 months and estimates that his friend was able to make, at least, $200,000, with the insider information. For his contributions, Jorgenson was paid $40,000. The SEC claims that Stokke made $393,125 in profit off of the insider information.
Jorgenson stated that he made $130k a year while working at Microsoft and had been working with the company for three years; he hoped to eventually take the extra cash they made with the insider trading information and open a hedge fund.
Neowin reached out to Microsoft who provided the following comment on the issue: "Our company has zero tolerance for insider trading. We helped the government with its investigation and terminated the employee."
Stokke first used the information to trade ahead of the announcement that Microsoft would invest $300 million into Barnes & Noble's e-reader business. This information was used to purchase call-options, netting $185,000 in trading profits.
The other two times Stokke traded with insider information were related to quarterly earnings, where again, Stokke was able to predict the market movement because he already knew the announcement in advance.
Jorgenson has admitted to the crime publicly which means he is likely facing time behind bars along with a hefty fine.