Sunday, 1 February 2015
Last updated 2 days ago
Mar 17 2014 | 12:55pm ET
SAC Capital Advisors founder Steven Cohen makes a cameo appearance in the latest insider-trading case against one of his former employees.
The Securities and Exchange Commission announced last week that it had settled fraud allegations with Ronald Dennis, a former analyst at SAC’s CR Intrinsic division. The complaint against Dennis mentions three portfolio managers identified only by letters; Cohen is “Portfolio Manager C,” Bloomberg News reports.
Cohen earned $1.1 million trading on Dell Inc. shares in August 2009 after speaking to “Portfolio Manager B,” Dennis’ boss, the complaint alleges. “Portfolio Manager B” is Eric Gerster, who oversaw Dennis at CR Intrisic,” according to Bloomberg. He succeeded “Portfolio Manager A,” Alec Schutze, when Schutze left SAC in 2009 to join Marshall Wace Asset Management.
“One the afternoon of Aug. 26, 2009, Portfolio Manager B informed Dennis that Portfolio Manager B was supposed to speak with Portfolio Manager C at SAC Capital about Dell,” the SEC alleges.”Portfolio Manager B asked Dennis to ‘call me first, to which Dennis replied ‘k….’ Later that day, Portfolio Manager C purchased 500,000 shares of Dell stock on behalf of an SAC Capital hedge fund.” Dennis and Gerster were “tagged” for credit for the recommendation.
The SEC, which is suing Cohen for failure to supervise his employees, does not accuse Cohen, Schutze or Gerster of wrongdoing in the case against Dennis, who agreed to pay $200,000 and to be barred from the securities industry to settle the allegations. The Dell trades played a key role in the insider-trading conviction last year of former SAC portfolio manager Michael Steinberg.
The complaint alleges that Schutze bought Foundry Networks shares on Dennis’ recommendation. Foundry and Dell are the two companies in which Dennis was accused of illicitly trading.
SAC last year pleaded guilty to insider trading and is becoming a family office, to be known as Point72 Asset Management.
According to Bloomberg, Gerster, became concerned just months after the Dell trade, following the arrest of Galleon Group founder Raj Rajaratnam. He was questioned for hours by SAC’s lawyers after he resigned shortly after Rajaratnam’s arrest, which Bloomberg notes was “highly unusual.” He later joined Guggenheim Global Trading and moved to Millennium Management last year.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…