U.S. regulators have filed a civil case against Steven Cohen, chief of the embattled hedge fund firm SAC Capital. Regulatory documents filed with the Securities and Exchange Commission today say that he “failed reasonably to supervise two of his senior employees, who engaged in insider trading under his watch.” Regulators want to bar Cohen from ever overseeing any investment funds ever again. However, as this case is a civil suit, the SEC still has not charged Steve Cohen with fraud.
SAC Capital Advisors said in a statement today that the charges have “no merit” and that Cohen will fight the charges “vigorously.”
Case against Cohen summarized
According to the documents, regulators charge that Cohen on at least two occasions in 2008. Two portfolio managers accessed nonpublic information concerning three public companies. They say Cohen received information from the managers indicating that they accessed insider information in support of their trades. Of course they’re referring to Mathew Martoma, who was charged with insider trading late last year, and Michael Steinberg, who was arrested in March.
Regulators claim that the information Cohen received in each of these cases “should have caused any reasonable hedge fund manager in Cohen’s position to take prompt action.” They said that he didn’t investigate and take steps to prevent insider trading in spite of the red flags. Instead, they said he “stood by,” allowed the alleged insider trading to go on and even praised and rewarded the two portfolio managers for their work.
The SEC has already filed criminal charges against Martoma and Steinberg, and one analyst, Jon Horvath, who admitted reporting to Steinberg, pleaded guilty to charges and is cooperating with the investigation.
Parties named in the case
Within the case filed against Steven Cohen, the SEC names several parties, including the obvious ones like Cohen himself, SAC Capital, Martoma, Steinberg and Horvath. It also lists two unnamed parties. One is an unnamed hedge fund manager who worked at Sigma Capital from 2003 to 2006 before founding an unregistered investment adviser that SAC Capital funded. The other is an unnamed portfolio manager who also worked at Sigma Capital.