U.S. Senator Elizabeth Warren has sent a letter to the U.S. Securities and Exchange Commission (SEC) asking for an explanation as to why billionaire Steve Cohen has been allowed to open a new firm.
Warren, who is known for her strong stance on financial regulation, wants to know why the SEC allowed Cohen to start a new investment firm after the body banned him from the money management business until 2018. According to Reuters the letter from Massachusetts Democrat Warren heavily criticized the decision.
Senator Warren continues quest for stronger financial regulation
The fact that Cohen was allowed to set up a new firm known as Stamford Harbor Capital L.P. makes “a mockery of the SEC’s core mission to ‘protect investors,” according to Warren.
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“The Commission has permitted a recidivist hedge fund manager, well-known for his former company’s willingness to evade and ignore federal law, to once again profit from – and potentially exploit – investors,” she wrote, adding it is “the latest example of an SEC action that fails to appropriately punish guilty parties, deter future wrongdoing, and protect investors.”
Her criticism stems from the fact that Cohen was involved in an insider trading scandal in 2012. The scandal broke at SAC Capital Advisors, a hedge fund that Cohen founded.
In January the SEC and Cohen reached a settlement that would bar him from any supervisory position at brokers, dealers or investment advisers until 2018. The punishment was allegedly a response to charges related to the SAC scandal.
SEC under pressure due to alleged “shell management structure” at Stamford Harbor
However the SEC approved the registration of the new firm earlier this month. Cohen is listed as the owner of Stamford Harbor.
According to a statement from the new firm, Cohen will “not supervise the activities of anyone acting on its behalf,” which means that he will not break the agreement reached with the SEC.
Filings say that Stamford Harbor will focus on investments in private companies that are illiquid, that is to say that they are hard to trade quickly. However documents do say that the firm could look for outside investment at some point.
Warren has accused the firm of operating a “shell management structure” and implored the SEC to work to ensure “that future settlement agreements cannot be so easily undermined.”
Her letter also asked for a list of “other individuals or firms who, like Mr. Cohen, were barred from managing funds (or barred from other activities by SEC) yet are presently indirectly involved in those activities with SEC-registered entities.”