New York (HedgeCo.Net) – CBS News reports that according to an anonymous source, SAC Capital has “reached a tentative deal with federal prosecutors to settle the case and pay more than $1 billion in fines and forfeitures.”
Although the deal has not been finalized, the WSJ says that prosecutors are seeking a $1.8 billion penalty. The SEC is also seeking a lifetime ban for SAC Capital’s manager from the securities industry.
Investigations of insider trading by the SEC and the US Attorney’s office have haunted hedge fund manager Steven A. Cohen, the 117th richest man in the country, for the last few years.
“The SAC case illustrates the growing concern over insider trading among hedge funds. Since passage of Dodd-Frank, you have more than 1,000 newly registered funds acting as investment advisers,” Marc Powers, head of the securities litigation and enforcement practice at BakerHostetler says. “Not only are there potential 10b-5 violations but advisers are required to have proper policies and procedures in place to prevent misuse of material non-public information. Failure to have these in place exposes hedge funds to separate charges that can bring substantial penalties and create steep reputational damage among institutional investors, who are notoriously wary of money managers with regulatory problems.”
Since the investigation started, nine current or former SAC employees have been linked to insider trading while working at SAC Capital, four of whom pleaded guilty. Cohen himself has taken the 5th, declining to testify before a grand jury.
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