SAC Capital has been under fire with prosecutors and regulators since a handful of its portfolio managers were arrested on insider trading charges. Now a report from Kate Kelly of CNBC (via Business Insider) suggests the firm could be close to settling—possibly even this week.
SAC Capital tries to settle
SAC was indicted in July on charges of criminal securities and wire fraud. According to Kelly, sources say the basic terms of the settlement between prosecutors and SEC on those charges have been decided upon. However, they are still working on a number of technical problems.
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The terms may include a $1 billion fine and a guilty plea. SAC has approximately $13 billion in assets under management, so $1 billion is really pocket change to the firm. What may be more damaging to it is the guilty plea, which will probably make it unable to handle public money going forward.
What’s next for SAC Capital?
SAC Capital chief Steve Cohen has been said to consider transforming the firm into a so-called “family office” to manage only his money and the money of his senior employees. If the firm is no longer allowed to manage public money, then it will have to either convert to a family office or else shut down completely. If it does shut down though, the story won’t really be over.
According to Kelly’s sources and securities lawyers, SAC could just move the rest of its capital and its employees to a new firm with a new name. However, Cohen himself may end up being barred from being allowed to trade. The Securities and Exchange Commission sued him in July for not adequately supervising his employees. The agency seeks his barring from the industry.
Settlement deadline for SAC approaching
Prosecutors apparently told SAC Capital that if they are going to settle, it will have to be done no later than Nov. 18. That’s when the federal trial of SAC manager Michael Steinberg is set to begin. SAC employees have been expecting that a deal will be announced this week because that date is fast approaching.
In the past, it has been reported that prosecutors wanted SAC to pay a $1.8 billion fine, although the firm reportedly held out for a lower amount and also a $616 million deduction for the fine it paid months ago to settle related charges with the SEC.