Wednesday, 23 July 2014
Last updated 2 hours ago
May 3 2013 | 9:41am ET
With nine current or former employees accused—or convicted—of insider trading and facing an ongoing federal investigation, SAC Capital Advisors announced a new series of policies designed to combat illicit trading.
Chief among the new rules is a clawback provision, allowing SAC to recover compensation paid to employees found guilty of criminal charges and those sanctioned by regulators. The clawback rule goes into effect on Jan. 1, and will not apply to firm founder Steven Cohen himself, The Wall Street Journal reports.
SAC is also tackling expert-networks, an area that produced many convictions for federal prosecutors. SAC portfolio teams will be permitted to call upon an individual expert-network consultant four times a year; further consultations will require approval from the compliance department. In addition, compliance will increase its "chaperoning" of phone calls with such consultants.
The hedge fund has also banned staffers from speaking with employees of public companies, except for their senior management or investor-relations employees, although the prohibition can be waived.
In addition, SAC announced that it planned to increase the size of its compliance team to about 45 employees, up from just 10 five years ago. In particular, the firm plans to add compliance officers with medical training; former portfolio manager Matthew Martoma is accused of trading on confidential information he received from a medical professor.
"We have endured speculation that somehow this conduct is acceptable to the firm, its senior management and to me," Cohen, himself believed to be the ultimate target of the federal investigation, wrote to clients yesterday. "It is not, nor has it ever been."
"These reforms send an unmistakable message: We have zero tolerance for wrongdoing and if you are caught breaking the rules, it will cost you," Cohen continued. "This problem is our problem to solve. It's my name on the door and we will solve it."
The new rules come as SAC deals both with the investigation and fallout from it, and investors' reaction to it. The $15 billion firm suffered $1.7 billion in redemptions in February and last week moved—for the second time—to stave off further withdrawals by loosening its redemption terms. And in March, SAC agreed to pay $614 million to settle its role in two alleged cases of insider-trading, one of which is yet to go to trial.
"Our reforms are no panacea," Cohen wrote. "It is not possible to stop someone intent on breaking the law."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…