SEC settles insider trading charges with former vice president of California tech company

The US Securities and Exchange Commission has settled allegations of insider trading with Balasubrahmanya Kuchibhotla, former vice president and general manager of Nutanix, Inc., a San Jose, California-based provider of enterprise cloud platform software solutions.  Prior to serving as vice president, Kuchibhotla held the position of senior director of technology at Nutanix.

According to the statement of facts, Kuchibhotla acknowledged and agreed to Nutanix’ insider trading policies, which prohibited employees and their immediate family members from trading in Nutanix publicly-traded options, and from trading on the basis of material nonpublic information learned during the course of their employment.  Kuchibhotla also confirmed his understanding of the company’s code of business conduct and ethics, which required Kuchibhotla to safeguard nonpublic information pertaining to his employer.  Nutanix management sent reminders about these policies at quarterly intervals. 

As alleged, Kuchibhotla attended a confidential all-hands company meeting in late January 2019, and learned that the company’s financial situation had deteriorated during the preceding fiscal period.  Kuchibhotla’s salary was frozen, and no new hiring was permitted.  The following month, while in possession of material nonpublic information about the company, Kuchibhotla entered into call option contracts for Nutanix stock, and sold 7,475 shares of his personal Nutanix holdings; a few days later, when Nutanix stock price dropped 32.7% following the company’s announcement of disappointing quarterly results, Kuchibhotla sold the put option contracts and closed out the call option contracts, profiting by $145,600 from these transactions, and avoiding losses of $147,320 from the sale of his Nutanix shares.

The SEC found that Kuchibhotla knew, or was reckless in not knowing, that the information he had learned at the confidential meeting was material and nonpublic, and that he owed a duty of trust and confidence to the company.  The SEC concluded that Kuchibhotla’s conduct violated Section 10(b) of the Exchange Act of 1934, and Rule 10b-5 thereunder.  As a result, Kuchibhotla was ordered to cease and desist from future violations of these provisions, and to pay a civil money penalty of $585,960. 

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