Steven A. Cohen’s firm will stop collecting employees’ best trading ideas for a central investment pool and rewarding them with a special bonus, a practice that the U.S. government said created wrong incentives at his former hedge fund SAC Capital Advisors.
Bloomberg News reports that Point72 Asset Management, the successor firm to SAC, will end the “tagging” of new investment ideas immediately and unwind existing trades by the end of the year, the firm said in an employee memo yesterday, a copy of which was obtained by Bloomberg News.
The move is the latest in a series of management and organizational changes at Cohen’s firm, after SAC paid a record fine to settle U.S. charges of insider trading and Cohen agreed to stop managing money for outside clients. Money managers and analysts at SAC vied for the attention of the billionaire by submitting their best trade ideas to a central investment pool, known as the “Cohen Account.” They were paid an extra bonus if their ideas were tagged and they were profitable.
“The government cited tagging prominently in its case against SAC and the cases brought against its employees, believing tagging created an incentive for an employee to seek improper information in the hope of receiving a ‘tag bonus,’” Douglas Haynes, president of Point72, said in the memo.
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