This past summer Robert Ramnarine, an executive with the Bristol-Meyers Squibb Company, was arrested by the FBI and charged with insider trading for buying stock options in three companies targeted for acquisition. Ramnarine allegedly made $311,361 in illicit profits from the trades. Yet even if convicted, Ramnarine could conceivably serve less time in jail then someone making just $25,000 in profits. Why? Because of a push by the federal government to crack down on insider trading. Even those who do not make significant profits can receive stiff prison sentenceswitness the two-year hitch handed out in October to former McKinsey CEO and Goldman Sachs board member Rajat Gupta for his conviction stemming from the Galleon scandal, even though Gupta did not receive any monetary benefit from the insider tips he shared. The Federal Sentencing Commissions new amendment to the Sentencing Guidelines mirrors this evolving trend.
On May 1, 2012, the Sentencing Commission passed an extensive amendment to the Sentencing Guidelines, as directed by Section 1079A(a)(1)(A) of the Dodd-Frank Act. The new amendment, which became effective on November 1, 2012, has the potential to increase the sentences persons guilty of insider trading receive by creating a higher punishment for sophisticated acts of insider trading, even when the amounts at issue are relatively small.
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