The Securities and Exchange Commission (SEC) has charged a former Microsoft portfolio manager and his friend (also his business partner) with insider trading.

The SEC alleged that former Microsoft senior employee Brian D. Jorgenson had obtained confidential information related to upcoming company news while working in the finance and investments division and tipped his friend, Sean T. Stokke, in advance of Microsoft's announcements.

The SEC revealed the charges on Thursday, December 19 and said that Jorgenson and Stokke split the profits equally in their shared brokerage accounts. The SEC also unveiled that the duo were trying to generate enough profits to make their own hedge fund.

According to the SEC, the pair made around $400,000 combined profits where Jorgenson gave confidential information regarding upcoming Microsoft news to Stokke, who then traded based on the information received. Jorgenson and Stokke were involved in insider trading since April 2012, which lasted till October this year.

Per the charges filed, the duo is said to have traded in advance of a public announcement that Microsoft intended to invest $300 million in Barnes & Noble's e-reader business. They also traded ahead of the company's two quarterly financial reports.

The U.S. attorney's office for the Western District of Washington has also confirmed that Jorgenson and Stokke face criminal charges for participating in the dubious scheme.

"Abusing access to Microsoft's confidential information and generating unlawful trading profits is not a wise or legal business model for starting a hedge fund," said Daniel M. Hawke, chief of the SEC Enforcement Division's Market Abuse Unit and director of the SEC's Philadelphia Regional Office.

A Microsoft spokeswoman said that the company has "zero tolerance" for its employees involved in insider trading. Microsoft said it assisted the government with its investigation and terminated Jorgenson as soon he was found guilty of insider trading.

Angelo Calfo, an attorney representing Jorgenson said that his client is "incredibly remorseful" for what he did as a manager while working for Microsoft. Calfo also added that right now Jorgenson's primary goal is to share his experience with others so that other do not commit the same "stupid mistake" what he did.

"We'll be working with the U.S. attorney's office on a fair disposition of the case," said Calfo.

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