Top SAC Capital Holdings on Watch as SEC Charges Cohen
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SEC Charges Steven A. Cohen For Failing to Supervise Portfolio Managers and Prevent Insider Trading
July 19, 2013 2:04 PM EDTThe Securities and Exchange Commission today announced charges against hedge fund adviser Steven A. Cohen for failing to supervise two senior employees and prevent them from insider trading under his watch.
The SECs Division of Enforcement alleges that Cohen received highly suspicious information that should have caused any reasonable hedge fund manager to investigate the basis for trades made by two portfolio managers who reported to him Mathew Martoma and Michael Steinberg. Cohen ignored the red flags and allowed Martoma and Steinberg to execute the trades. Instead of scrutinizing their conduct, Cohen praised Steinberg for his role in the suspicious trading and rewarded Martoma with a $9 million bonus for his work. Cohens hedge funds earned profits and avoided losses of more than $275 million as a result of the illegal trades.
Hedge fund managers are responsible for exercising appropriate supervision over their employees to ensure that their firms comply with the securities laws, said Andrew J. Ceresney, Co-Director of the SECs Division of Enforcement. After learning about red flags indicating potential insider trading by his employees, Steven Cohen allegedly failed to follow up to prevent violations of the law. In addition to the more than $615 million his firm has already agreed to pay for the alleged insider trading, the Enforcement Division is seeking to bar Cohen from overseeing investor funds.
According to the SECs order instituting administrative proceedings against Cohen, portfolio managers Martoma and Steinberg obtained material non-public information about publicly traded companies in 2008, and they... More
