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(Image source: Bloomberg / Scott Eells)
BY BRIAN BONDUS
The Securities and Exchange commission has filed a civil lawsuit against SAC Capital
Advisors' CEO Steven Cohen for failing to properly supervise former employees accused
of insider trading.
The SEC has filed many inquiries into SAC resulting in more than $600 million in civil
penalties, but this is the first accusation against the billionaire CEO Steven Cohen,
whose net worth is more than $9 billion. (Via The Wahington Post)
SAC might be coming under this scrutiny for its sheer size and suspected too-good-to-be-true
returns. On any given day the company's actions can account for as much as 3 percent of the
New York Stock Exchange's daily trading.
One of the two cases the SEC says Cohen ignored red flags came in 2008 when an employee got
a tip Elan and Wyeth was creating a new Alzheimer drug. (Via The Guardian)
The tip resulted in more than $275 million in profits for the firm, according to the
SEC. (Via CNN)
The other alleged insider trading move came when SAC sold off $11 million of Dell stock
just prior to a less than expected earning report was released. (Via Bloomberg)
Both former employees charged in the insider trading cases have pled not guilty. Cohen
has also said he is innocent of any wrongdoing in both cases. If the SEC finds Cohen guilty
the hedge-fund tycoon could face a much stiffer penalty than any monetary amount.
"They can effectively put him out of business. He will not be able to manage a hedge fund
if they can find he failed to supervise."
A New York law firm did a survey about just how common inside trading is in the financial
industry. It found 24 percent of respondents from financial services industry said they
would participate in insider trading if the payout was in the millions and an attorney
for that law firm calls for more regulation. (Via Business News Network)
"In Wall Street, in the city of London there are still bad apples and we can't expect them
to just not be there because the banks they work for say they are not.
In the SEC's civil cases fines and a lifetime ban from trading are the most severe of the
punishments possible, but jail time could be possible if the justice department gets
involved.