The US Securities and Exchange Commission (SEC) has banned hedge fund manager Steven Cohen from supervising funds that manage outside money until 2018.
This deal with SEC will resolve charges that Cohen failed to supervise a former portfolio manager who involved in insider trading while employed at his firm.
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The SEC has ordered Cohen’s family firms to be subjected to SEC examinations and to retain an independent consultant to conduct periodic reviews of their activities to ensure compliance with securities laws.
According to SEC findings, Cohen failed to supervise former portfolio manager Mathew Martoma, who was involved in insider trading in 2008 while employed at CR Intrinsic Investors, a wholly-owned subsidiary of S.A.C. Capital Advisors, an entity founded by Cohen.
Also, Cohen helped Martoma to make trades based on the illegally obtained information and placed similar trades in accounts that Cohen controlled. He also encouraged Martoma to talk to a doctor about nonpublic drug trial results to inform trading decisions.
SEC claims that Cohen’s hedge funds have earned profits and avoided losses of approximately $275m based on these trades.
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By GlobalDataUnder the agreement, Cohen will have to retain an independent consultant and adopt consultant recommendations as well as submit to on-site SEC examinations of his registered or unregistered firms.
SEC examiners and an independent consultant will review activity at Point72, which invests Cohen’s fortune.
The SEC could also extend the term of the settlement if it takes new actions against Cohen or related firms.
Cohen neither admitted nor denied the SEC’s allegations that he failed to supervise Mathew Martoma.
As per the settlement terms, if Cohen becomes associated in a supervisory capacity with an entity that is a registered broker, dealer, or investment adviser in 2018 or 2019, that entity will retain an independent consultant through 31 December 2019, the SEC said.
SEC’s enforcement division director Andrew Ceresney said: "Before Cohen can handle outside money again, an independent consultant will ensure there are legally sufficient policies, procedures, and supervision mechanisms in place to detect and deter any insider trading.
"The strong combination of a two-year supervisory bar and additional oversight requirements achieves significant and immediate investor protection and deterrence, while ensuring that the activities of his funds are closely monitored going forward."
