SEC Charges Former Collins Stewart Tech Analyst in SAC Insider Trading Case

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Updated from 2:09 p.m ET with Microsoft comment .

NEW YORK ( TheStreet) -- U.S. prosecutors have charged former Collins Stewart techology analyst Sandeep Aggarwal with leaking non-public information about Microsoft , as regulators widen a Wall Street dragnet on insider trading and press criminal charges against hedge fund giant SAC Capital Advisors

Aggarwal is alleged by the government to have gleaned Microsoft's non-public negotiations of a web search partnership with Yahoo! from a source inside the software giant and tipped the information to SAC Capital's Richard Lee.

Between May and June of 2009, the SEC alleges Aggarwal's insider at Microsoft provided him with periodic updates concerning the negotiations. Aggarwal is accused of then passing on that information to SAC's Lee.

Aggarwal told Lee his Microsoft source informed him the search deal "may happen any time now in the next two weeks," according to the SEC's criminal complaint.

Lee purchased hundreds of thousands of shares of Yahoo stock in a portfolio he managed on behalf of SAC Capital. Lee also purchased shares of Yahoo stock in his personal trading account, the SEC said.

When the information was reported in the media almost a week later, Yahoo's stock price rose about 4% netting SAC Capital and Lee substantial profits, according to the SEC.

Aggarwal lives in India where he runs a research firm but was arrested by F.B.I. agents in San Jose, California on Monday.

In a parallel action brought forward by the SEC, it is charging Aggarwal and Lee with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a final judgment ordering Aggarwal and Lee to pay disgorgement of ill-gotten gains.

Aggarwal left Collins Stewart in March of 2010 and the firm was acquired by Cannacord Genuity two years later. The analyst subsequently worked for Digital Route , and has been a prominent commentator in the media.

"As a company we have zero tolerance for insider trading, and we assisted the government with this investigation," a Microsoft spokesperson said. "We have strict policies that prohibit insider trading, and we expect our employees to adhere to them."

A Cannacord Genuity spokesperson declined to comment other than to say that the firm had "cooperated fully" with the SEC's investigation.

Earlier in July, Lee became the sixth SAC Capital employee to have pleaded guilty to criminal charges pertaining to the SEC's inquest into insider trading on Wall Street.

Lee is also accused by the SEC of trading on non-public information pertaining to HP's 2010 acquisition of 3-Com, using illegal insider information gleaned from an outside consultant.

On Thursday, a grand jury indicted Lee's employer, hedge fund giant SAC Capital , for one count of wire fraud and four counts of securities fraud, in an insider trading conspiracy U.S. prosecutors allege lasted over a decade and led to hundreds of million of dollars in illegal profits and avoided losses.