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SAC Capital Advisors Settles Insider Trading Charges in Record Settlement
Author: Scarinci Hollenbeck, LLC
Date: November 8, 2013
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The Department of Justice recently announced a landmark settlement involving SAC Capital Advisors. The firm, which was once the world’s most powerful and successful players in the hedge fund industry, has agreed to pay nearly $1.8 billion in penalties to resolve allegations of insider trading.
According to a press release from U.S. Attorney Preet Bharara, the company agreed to plead guilty to all of the criminal counts and will cease its investment adviser operations. While SAC cannot accept any additional funds from outside investors, it will be permitted to continue to manage the funds of its founder, Steven A. Cohen.
“The government believes that the proposed global resolution is fair, reasonable, and firmly promotes the interests of justice, deterrence and respect for the law. The aggregate $1.8 billion is – to the Government’s knowledge – the largest financial penalty in history for insider trading offenses,” prosecutors stated in court documents.
As we have previously discussed on this Business Law Blog, the Securities and Exchange Commission (SEC) has also stepped up enforcement of insider trading. SAC Capital previously agreed to pay $616 million to settle a parallel civil action, which will now be deducted from the $1.8 billion total in fines and forfeiture.
While SAC Capital can now put the insider trading scandal in the rear view, Cohen still a number of legal headaches. The settlement does not prohibit the government from continuing its criminal and civil investigations into Cohen’s role in the trading schemes. The agreement expressly states that it “provides no immunity from prosecution to any individual.”
Given the intense scrutiny on insider trading by both the DOJ and the SEC, firms should ensure that they have comprehensive policies and procedures in place to monitor trading compliance. While corporations don’t serve jail time, criminal penalties for compliance oversights can be extremely costly.
If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Jay Surgent, or the Scarinci Hollenbeck attorney with whom you work.
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