Despite an insider-trading settlement that will cost it more than $600 million, SAC Capital Advisors is not yet in the clear.
The $15 billion hedge fund's president warned investors that investigations into the firm were continuing, while also assuring them that it was confident that neither it nor firm founder Steven Cohen had done anything wrong. But Tom Conheeney said that Friday's $616 million deal with the Securities and Exchange Commission, which covers the allegedly illegal trading done by former SAC trader Mathew Martoma, was just an "important first step."
"I don't want to leave you with the thought that this means everything is cleared up," Conheeney said.
Cohen did not speak on the 20-minute call, and SAC officials did not take questions. Conheeney said the decision to settle was a difficult one, but that eventually SAC decided that "a protracted litigation with the SEC, given all the tools at their disposal, would have taken a protracted toll on the firm." In particular, Conheeney said the firm was worried about a long fight's impact on Cohen and SAC's employees, as well as its relationships with its investors, who moved to redeem $1.7 billion from the firm last month.
Peter Nussbaum, a lawyer for the hedge fund, noted that SAC could have had to pay almost twice the $616 million it agreed to had it lost at trial.
SAC has pledged to cover the costs of the settlement; investors will not be impacted.
Conheeney said that SAC continues to cooperate with investigators and continues to work to improve its compliance procedures.
"We felt we had good compliance back in 2008," he said. "But no matter what type of compliance effort one has, this just goes to show that an individual can still do something wrong, can still hurt the firm in a significant way."
Martoma has pleaded not guilty, and his legal bills are being paid by SAC. He has resisted prosecutors' efforts to win his cooperation against Cohen.