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Monica Wolfe
Monica Wolfe
Articles (757) 

Securities and Exchange Commission Sues Guru Steven Cohen

July 19, 2013 | About:

Earlier today, the U.S. Securities and Exchange Commission (SEC) made an unexpected move by charging Guru Steven Cohen with Failure to Supervise Employees. This charge against Cohen is in direct relation to former SAC Capital Advisor Mathew Martoma and former SAC executive Michael Steinberg, who are both facing criminal and civil insider trading charges. A spokesman for SAC Capital, Jonathan Gasthalter, said The SEC's administrative proceeding had no merit. He went on to say, “Steven Cohen acted appropriately at all times and will fight this charge vigorously.”

The SEC charges are part of a long-running investigation on Cohen and his $15 billion hedge fund, SAC Capital. During this probe, the U.S. Securities and Exchange Commission has charged nine former SAC employees of illegal insider trading. Cohen has not been charged with illegal insider trading, but is instead being charged for “ignoring the red flags and allowing Martoma and Steinberg to execute the trades in several stocks where the SEC found evidence of insider trading,” the agency said.

The SEC decided to charge Cohen through an administrative proceeding rather than filing a lawsuit against him in federal court. The agency said that they would determine Cohen’s penalty during this proceeding. The SEC is seeking to bar Cohen from the financial industry as well as from managing other people’s money. Cohen could also end up paying additional fines in order to clear these charges.

The 17-page administrative order reports that in the cases of Martoma and Steinberg, Cohen had “received highly suspicious information that should have caused any reasonable hedge fund manager in Cohen’s position to take prompt action to determine whether employees under his supervision were engaged in unlawful conduct and to prevent violations of the federal securities laws.”

The SEC alleges that both Steinberg and Martoma provided information to Cohen that suggested they had access to inside information, but instead of reporting them Cohen praised one of the managers for his trades and rewarded the other with a $9 million bonus.

In March, SAC Capital agreed to pay a record-breaking $616 million in order to correct the insider trading scandal caused by Mathew Martoma. Many thought that this hefty fine would be the end of the controversy, but it looks like that won’t be the case.

In June alone, outside investors moved over $3 billion dollars from the fund because of the investigation against Cohen and his fund.

Rating: 4.2/5 (12 votes)


Sally Jones
Sally Jones - 4 years ago    Report SPAM
Excellent summary of a complex situation.
Dr. Paul Price
Dr. Paul Price - 4 years ago    Report SPAM
If they are going after Mr. Cohen the SEC should certainly be prosecuting Jon Corzine.

It appears that Friends of Obama are exempt from the law.

Dr. Paul Price
Dr. Paul Price - 4 years ago    Report SPAM
The SEC did not charge Merill Lynch with 'failure to supervise' the broker that leaked the inside information that led to Martha Stewart's felony conviction.

Selective enforcement that is politically determined is abuse of our legal system.
AlbertaSunwapta - 4 years ago    Report SPAM
What happened with the Fairfax Financial's lawsuit against SAC?

Vgm - 4 years ago    Report SPAM

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