Hedge Fund Managers Settle SEC Charges Accusing Them of Sharing Confidential Investment Information with Each Other

Nehal Chopra, founder of the hedge fund Ratan Capital Management, and her husband Paritosh Gupta have settled US Securities and Exchange Commission charges alleging that they acted improperly: He, by sharing confidential investment recommendations with her and she, by not disclosing to her clients that her husband was the one who gave her this information.

Gupta worked at Brahman Capital, a hedge fund firm. He later launched Adi Capital Management, also a hedge fund firm. Brahman and Ratan are competitors in their field.

According to the SEC, Gupta provided Chopra with information developed for Brahman’s own clients, as well as the timing of Brahman’s sizes and positions, and he advised her about certain investments. In one example noted by the regulator, Gupta asked his wife about the size of her firm’s position in one security. After she responded, he advised her to increase that position. Ratan would go on to buy more shares that day.

Gupta, on at least once occasion, allegedly oversaw Ratan’s portfolio while Chopra was abroad. He also is said to have advised Chopra on how to grow her network.

Gupta is accused of drafting and editing some of Ratan’s marketing materials and even certain correspondence for prospective and current investors. Some of the materials sought investments in Ratan. For example, Ratan’s private placement memorandum for its first fund articulated a strategy that was “virtually identical” to that of Gupta’s funds. He also is believed to have helped field prospective employee candidates for Ratan.

Gupta purportedly did not tell Brahman that he was offering Chopra investment advice. Brahman, in settling the SEC charges brought against it, must now pay a $250K penalty for not “reasonably” overseeing Gupta.

Brahman, Ratan, Gupta, and Chopra settled the SEC charges without denying or admitting to the findings.

If you think your hedge fund investment losses may be due to financial fraud, negligence, or mistakes committed by your hedge fund manager, broker, or a financial firm, contact The SSEK Partners Group today.

The SEC Order in the Case Against Chopra and Gupta (PDF)

The SEC Order in the Case Against Brahman Capital (PDF)