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Not Guilty Plea: SEC vs. Hedge Fund SAC

imagesNew York (HedgeCo.Net) – The SEC yesterday charged Steven A. Cohen’s hedge fund SAC Capital Advisors with insider trading ahead of major announcements by technology companies. The firm was charged in federal court in Manhattan with wire fraud and four counts of securities fraud.

Peter Nussbaum, a member of SAC’s general counsel, today put in the plea of not guilty, according to the WSJ.

The SEC said that SAC’s “relentless pursuit of an information ‘edge’ fostered a business culture within SAC in which there was no meaningful commitment to ensure that such ‘edge’ came from legitimate research and not inside information.”

USA Today reports: The 41-page indictment and prosecutors depicted a corporate structure and culture in which Cohen sat at the center of a web of portfolio managers and research analysts, systematically collecting and trading on information he should have suspected was illegally gathered from employees of publicly traded firms such as Intel, Dell and Yahoo.

“Hedge fund managers are responsible for exercising appropriate supervision over their employees to ensure that their firms comply with the securities laws,” said Andrew J. Ceresney, Co-Director of the SEC’s Division of Enforcement. “After learning about red flags indicating potential insider trading by his employees, Steven Cohen allegedly failed to follow up to prevent violations of the law.

The SEC also charged SAC portfolio manager Richard Lee with illegal trading yesterday based on nonpublic information he received from sources with connections to insiders, which enabled the hedge fund that he managed to generate more than $1.5 million in illegal profits.

Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “We continue to relentlessly pursue and expose insider trading by hedge fund managers who are under the misguided belief that they won’t be apprehended and held accountable for their unlawful conduct.”

WSJ reports: In the civil action filed alongside the criminal charges, the government said it was seeking to recover “any and all” of the firm’s assets, potentially a huge blow to the wealth Cohen and his employees have acquired over more than two decades of outsize investment returns. The government estimates those assets at $10 billion.

“SAC will continue to operate as we work through these matters,” the hedge fund said in a statement. “(The government) will permit SAC to continue its operations.”

Alex Akesson
Editor for HedgeCo.net
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