A U.S. judge granted final approval to a $602 million (£355 million) insider trading accord between a unit of billionaire Steven A Cohen’s SAC Capital Advisors LP and the U.S. Securities and Exchange Commission.
This means the former SAC Capital Advisors’ insider-trading settlements can at last be considered final.
These Are John Buckingham’s Stock Picks For 2021
The economy remains in distress, although there are signs of recovery underway. John Buckingham of Kovitz, editor of The Prudent Speculator newsletter, has found that value stocks typically outperform coming out of economic downturns. Thus, he argues that this is an excellent time to be a value investor. Q4 2020 hedge fund letters, conferences and Read More
Judge’s concern last year for SAC Capital’s settlement
In March 2013, it was reported SAC Capital’s over $600 million agreement with the SEC to settle the insider trading allegations of the agency may not obtain the approval of Manhattan Federal Judge, Victor Marrero.
The judge reportedly questioned the controversial language in the settlement agreement, which facilitates SAC Capital to ‘neither admit nor deny’ any wrong doing in the alleged insider trading. During a court hearing, the judge expressed concerns regarding the practice of securities regulators to use the language ‘neither admit nor deny’ in settlements.
SAC Capital agreed to settle the insider trading allegations filed by the U.S. Securities and Exchange Commission against its unit, CR Intrinsic, for $600 million. The SEC alleged that CR trader Martoma made trades involving shares of Wyeth Limited (NSE:WYETH) (BOM:500095) and Elan Corporation, plc (ADR) (NYSE:ELN) based on information he received from Dr. Sidney Gilman, who was responsible for releasing the official results of a clinical trial to the public.
Judge’s final approval
In 2013, Manhattan Federal Judge Marrero had made approval contingent on the outcome of a separate case involving a $285 million settlement between the SEC and Citigroup Inc (NYSE:C), which U.S. District Judge Jed Rakoff, who sits on the same court, had in 2011 rejected.
However, on June 4, a federal appeals court voided that rejection and returned the accord to Rakoff, saying it was improper for judges to require the SEC to establish the truth of its allegations as a condition of approvals. Keeping in view the reasoning in that decision, Marrero said he was persuaded that the SEC settlement with CR Intrinsic was ‘fair and reasonable’.
However, the judge said his delay in granting approval highlighted the SEC’s need to apply a ‘more rigorous inquiry’ in using ‘neither admit nor deny’ provisions in cases such as CR Intrinsic where parallel criminal actions were pending.
As part of the deal, SAC also agreed to cease managing outside capital and is now a family office known as Point72 Asset Management. As part of a related restructuring, the firm is closing CR Intrinsic.