U.S. investigators have subpoenaed a 2011 deposition of SAC Capital Advisors LP founder Steven Cohen, whose sworn statements on insider-trading compliance may hurt him as he tries to persuade regulators not to file a lawsuit that could shut his $14bn firm.
The SEC told the hedge fund November 20th that it planned to sue SAC for securities fraud and so-called control-person liability for failing to supervise employees. The same day, the agency accused an ex-SAC portfolio manager and his hedge-fund unit of insider trading for persuading Cohen, 56, to make $700m in illegal trades. Prosecutors also indicted the manager.
Cohen’s testimony, reviewed by Bloomberg News, establishes his personal control over the unit, CR Intrinsic, and records his unfamiliarity with his firm’s compliance and ethics policies on insider trading.
'I’ve read the compliance manual, but I don’t remember exactly what it says', Cohen said.
John Coffee, a securities-law professor at Columbia University Law School said, 'That’s a dangerous statement. The fact that he doesn’t know what’s in his compliance manual is useful to the SEC’s case'.
Also unhelpful was a statement that no employee had ever been punished for violating the firm’s compliance policy. In a six-year investigation of insider trading by Wall Street firms, federal prosecutors or the SEC have accused the former portfolio manager, Matthew Martoma, and six other SAC employees of trading on illegal tips while at SAC.
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