Industry Updates

SAC’s Cohen under probe by SEC, Senate

Thursday, May 26, 2011

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Steve Cohen Opalesque Industry Update: Two weeks after federal prosecutors succeeding in securing a guilty verdict against Galleon Group founder Raj Rajaratnam for insider trading, it has been reported that the Securities and Exchange Commission along with Congressional investigators, are looking into the trading record of SAC Capital, one of the largest hedge funds in the world based in Stamford, Conn., founded by Steve Cohen.

On Tuesday, Republican Sen. Chuck Grassley from Iowa, sent a letter to SEC chairwoman Mary Schapiro demanding an explanation of how the agency is dealing with alleged suspicious trading activities related to Cohen’s $13bn hedge fund.

Grassley wants to meet with SEC officials this Friday, in addition to requesting a written explanation of the agency’s probe into SAC’s alleged questionable activities. The senator gave SEC officials until June 7 to submit the written explanation, which specifically demands how the SEC “resolved: tips to some 20 trades conducted by SAC dating as far back as 2000.

Last week, a spokesman for Grassley confirmed that the senator would conduct an investigation into SAC’s suspicious trading “on about 20 instances.”

To begin his probe, Grassley has requested some key information from the Financial Industry Regulatory Authority (FINRA), an independent regulator of brokerage firms, on certain trades relating to SAC.

On Monday, SAC Capital issued a statement claiming they met with investigators and that they are cooperating with the probe.

“We welcomed the opportunity to meet with the staff to educate them about the firm and our compliance efforts, and had an entirely appropriate, professional and cordial meeting. We will continue to cooperate in any way we can,” the company said in the statement. Grassley wants to know if the SEC has issued a "Wells Notice" (a letter from a regulator informing a company that enforcement action has commenced), to SAC Capital concerning reports that company has received a high number of referrals compared to other companies.

The Senator wrote in his letter to Schapiro, “The function of Congressional investigations is not to establish whether any private firms have violated the law, but rather to examine particular facts and circumstances in order to assess how well the agencies created by Congress are executing the authorities granted to them. Looking into specific examples is essential for Congress to understand how effectively the S.E.C. pursues referrals such as these.”

The senator has been a constant critic of the SEC and is questioning the agency’s vigilance towards protecting investors. Grassley also criticized the SEC for failing to discover the massive Bernard Madoff Ponzi scheme despite signs.

Grassley now wants the investigation against SAC capital expanded .

A spokesperson from Grassley’s office refused to divulge more information on the expanded investigation. The spokesperson told Gamut News, “(We) can’t offer any specifics of the information received from Finra on SAC, at the request of the investigative agencies involved.”
- Precy Dumlao

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