The Securities and Exchange Commission said internet market analyst Sandeep Aggarwal passed confidential information to Richard Lee, who was charged and pleaded guilty last week to using advance information about a Microsoft-Yahoo partnership and the acquisition of 3Com Corporation by Hewlett-Packard to make trades.
The SEC said Aggarwal "tipped Lee in advance of a July 2009 public announcement about an Internet search engine partnership between Microsoft and Yahoo." Lee, in response, purchased "large amounts of Yahoo stock," both in the name of his SAC portfolio and in his own personal holdings, the SEC said.
"Rather than rely on legitimate research methods, Aggarwal obtained confidential information from a close friend at Microsoft and passed it along to Lee knowing that he would likely trade on it," said Sanjay Wadhwa, Senior Associate Director of the SEC's New York Regional Office in a statement.
"As a sell-side analyst, Aggarwal knew the rules and yet he broke them, which is why he joins the growing ranks of those held accountable by the SEC for insider trading," Wadhwa said.
Five former SEC traders have been convicted or pleaded guilty, while others have been charged.
The Telegraph said Aggarwal was arrested in San Jose, Calif. He lives in India and worked in San Francisco for financial consulting firm Collins Stewart, the newspaper said.
The SEC said last week it had opened "administrative proceedings" against Cohen for alleged "failure to supervise two senior employees and prevent them from insider trading under his watch."
The hedge fund has been charged with what regulators see as a pervasive leniency and tacit allowance for insider trading.