SEC Commissioners Publicly Dissent From SAC Decision

Nov 12 2014 | 10:21am ET

Two members of the Securities and Exchange Commission have accused their colleagues of caving in to plaintiffs’ lawyers in choosing to distribute $602 million from SAC Capital Advisors to victims of its insider trading.

Daniel Gallagher and Michael Piwowar, in a column for The Wall Street Journal, questioned whether there are any victims of the crimes at all and, if there are, whether it would be possible to find them. “In this case, it will be incredibly difficult and expensive to identify and compensate the victims,” the two, both Republicans, wrote. “In fact, it may not be possible to know who was harmed. The only guaranteed winners will be administrators who distribute the fair fund and class-action lawyers who will take a significant cut of any funds paid to their clients.”

Gallagher and Piwowar said the three Democrats on the commission bowed in the face of an “unprecedented lobbying campaign” by plaintiffs’ lawyers. They said the SEC received dozens of letters from “purported victims” that were clearly “sent at the behest of class-action lawyers in a parallel civil action.”

“These lawyers played no part in the commission’s successful enforcement action, yet they may now receive tens of millions of dollars as a result of the majority’s vote.”

Class-action law firms have sued SAC—now a family office called Point72 Asset Management—for $2 billion. The SEC said last month it would establish a fair fund to distribute the settlement to investors who held held shares of Elan Corp. and Wyeth LLC in 2008, when former SAC trader Mathew Martoma traded on tips about a drug trial run by the companies. How, exactly, the money will be disbursed is yet to be determined.

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