By Ann C. Logue
People must get away with insider trading all the time, because why else would someone with a very good, high-paying job throw it all away on an options trade? But that’s allegedly what Puneet Dikshit did. He was a partner at McKinsey, the global consulting giant. In September, he was advising Goldman Sachs on their acquisition of GreenSky, a consumer lending platform. He also allegedly made a cool $450,000 trading options on GreenSky. This week, the SEC charged him with insider trading.
That’s a lot of money, even for a highly paid McKinsey consultant. The firm has trade pre-clearance rules, as many professional services companies do, but Dikshit didn’t follow it. After all, the answer would have been no, and how would that get him $450,000? After the GreenSky deal was announced, CNBC reported that there had been unusual activity in GreenSky options. The trades were so brazen that an investment executive told CNBC that the trader was probably an inexperienced 22-year-old.
There are probably more folks who will be nabbed in this. Dikshit’s alleged trade involved 2,500 call options, but CNBC noted that there were 4,000 GreenSky calls purchased. Someone is going to spend the weekend on pins and needles.
This is not the first time that a senior staffer at McKinsey has dabbled in the dark arts. In 2011, the firm’s global head at the time, Rajat Gupta, was involved in insider trades in Goldman Sachs and P&G shares. Gupta’s scheme was more sophisticated. He received kickbacks for sending tips to Raj Rajaratnam, a hedge fund manager who used insider trading to generate alpha.
In the wake of an acquisition announcement, it’s standard practice for regulators to look at recent stock and options transactions in the names involved. A large purchase of deep out-of-the-money calls with a short expiration date is going to stand out. It took just two months for the SEC to build its case. Dikshit wasn’t an inexperienced junior employee. Was he arrogant, desperate, or foolish? We may have to wait for the revelation of the traders of the other 1,500 calls to learn more.