SAC Faces SEC Insider-Trading Probe On Biotech Merger

Jun 1 2011 | 4:49am ET

The Securities and Exchange Commission is zeroing in on SAC Capital Advisors in its investigation into possible insider trading of healthcare stocks.

SAC is the focus of a probe into trading around AstraZeneca's 2007 takeover of biotechnology firm MedImmune Inc., The Wall Street Journal reports. It is the third insider-trading investigation of the $14 billion hedge fund giant to emerge in recent months, and appears to confirm suspicions that SAC is a major target of U.S. authorities in their ongoing crackdown on insider trading.

The SEC's probe into trading around some of the biggest healthcare deals in recent years has found what it believes to be suspicious activity on the part of SAC. The firm and two of its affiliates sharply increased their stake in MedImmune during the first quarter of 2007 and then sold off all or most of those shares in the second quarter; the deal between MedImmune and AstraZeneca was announced on April 23, sending shares—which had already soared 50% in the six weeks before the announcement amidst rumors of a deal—up a further 18%.

All told, SAC's total holdings of MedImmune rose from just 151,000 shares in the fourth quarter of 2006 to almost 2.3 million shares in the first quarter of 2007. The firm then sold most of that stake in the second quarter.

"We respond to all regulatory inquiries fully and accurately, and we are confident in our business practices," SAC told the Journal. Neither the firm nor any of its current employees have been accused of any wrongdoing in any of the insider-trading cases or investigations that have dominated headlines on Wall Street over the past year-and-a-half.

But several former employees have been implicated and pleaded guilty in insider-trading cases, including both the Galleon Group case and that focused on expert networks; in addition, former SAC healthcare fund manager Joseph Skowron has been charged with insider-trading at FrontPoint Partners. The SEC's investigation is its third insider-trading probe into SAC in the past three years.

In addition, federal prosecutors are looking into trades made by firm founder Steven Cohen, and congressional investigators are probing 20 trades made by the firm, ostensibly as part of their oversight of the SEC.


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