Billionaire investor Steven Cohen, the founder or SAC Capital, prevented a lifetime ban to manage outside money after reaching a settlement agreement with the Securities and Exchange Commission (SEC).
The settlement agreement was connected to the Commission’s allegation that Cohen failed to supervise Mathew Martoma, a former portfolio manager who engaged in insider trading while employed at CR Intrinsic Investors, an investment advisory firm controlled by SAC Capital.
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According to the SEC, Cohen is prohibited from managing outside money until 2018, and his Family Office will be subject to examinations by the Commission.
The hedge fund manager established Point72 Asset Management, a family office to manage his personal funds after SAC Capital pleaded guilty to the insider trading charges filed against it by U.S. federal authorities. His firm paid a total penalty of $1.8 billion to prosecutors and securities regulators and returned the money of outside investors after pleading guilty.
Under the settlement, Cohen’s family office is required to retain an independent consultant to perform periodic reviews if its activities and to ensure compliance with securities laws.
Market observers perceived the settlement as a victory for Cohen because he avoided the lifetime ban, and he could manage money from outside investor again after two years if he complies with all the terms imposed by the SEC.
Steven Cohen – Additional oversight requirements
In a statement, Andrew Ceresney, Director, Enforcement Division of the SEC, said, “Before Cohen can handle outside money again, an independent consultant will ensure there are legally sufficient policies, procedures, and supervision mechanisms in place to detect and deter any insider trading.”
The strong combination of a two-year supervisory bar and additional oversight requirements achieves significant and immediate investor protection and deterrence while ensuring that the activities of his funds are closely monitored going forward,” added Ceresney.
The SEC order included a provision that extends the length of the settlement terms in case the Commission brings a new action against Cohen, a related entity, or an employee under his supervision.
Cohen did not admit or deny the findings of the SEC that he failed reasonably to supervise Martoma and prevent his violations of securities laws.
In a memo sent to Point72 employees, Cohen wrote, “Resolving the case gives us certainty and opens the path to raising outside capital. He added that the settlement “is not and cannot be a reason to become complacent.” According to him, Point72 would become a leader in compliance.