Image caption The two allegedly used insider information to make profits in the stock market

Former Microsoft manager Brian Jorgenson, and his friend Sean Stokke, have been charged with insider trading by the US securities regulator.

The Securities and Exchange Commission alleged that Mr Jorgenson, 32, tipped off Mr Stokke, 28, about Microsoft news before it was made public.

Mr Stokke traded on the information and the two shared in the profits, the regulator said.

It said they made $393,125 (£240,000) in profits over 18 months.

According to SEC documents filed in Seattle, the two men have admitted that "they knew it was illegal for them to trade on the basis of material non-public information".

Jenny Durkan, a US attorney, added in a statement: "For every stock market winner, there is a loser, and trading on confidential inside information is a cheater's way of gaining at the expense of others."

They knew that Microsoft's earnings were going to fall well short of analysts' consensus estimates and bought Microsoft options US Securities and Exchnage Commission

The commission said the two traded shares based on insider information between April 2012 and October this year.

It said the first trade was carried out ahead of Microsoft's announcement in April 2012 that it would invest $300m in Barnes & Noble's e-reader and digital media business.

The regulator alleged that the pair purchased Barnes & Noble call options ahead of the announcement, "which they sold for almost $185,000 in illicit profits".

'Conceal their fraud'

In July this year, they traded in advance of Microsoft's fourth-quarter earnings.

"They knew that Microsoft's earnings were going to fall well short of analysts' consensus estimates and bought Microsoft options," the regulator said, adding that they made profits of over $195,000 when they sold the options.

They also traded ahead of the Microsoft's first-quarter earnings in October this year, which the commission said they knew "would exceed analysts' consensus estimates".

"This time, in an effort to conceal their fraud, instead of trading directly in Microsoft options, they traded in options of the Technology Select Sector SPDR Fund, which held Microsoft common stock," it alleged.

They made almost $13,000 in profits from the trade.

According to the Associated Press news agency, Mr Jorgenson's attorney, Angelo Calfo said his client accepted he "made a really bad decision, and he's prepared to take his medicine".

Microsoft said it had "zero tolerance for insider trading. We helped the government with its investigation and terminated the employee".

Mr Stokke had previously worked with Mr Jorgenson at an asset management company.