Elizabeth Warren calls SEC's approval of firm 'a mockery' and questions mission

Elizabeth Warren

Elizabeth Warren is not thrilled with the US Securities and Exchange Commission.

On Thursday, the Massachusetts senator sent a missive to Mary Jo White, SEC chair, telling her she was making “a mockery” of the regulator’s core mission.

Warren, a scourge of Wall Street, is disappointed with the agency’s decision to approve Stamford Harbor Capital to act as investment adviser to outside clients. The reason? The firm is associated with Steven Cohen, former manager of SAC Capital Advisors, who pleaded guilty to insider trading in 2013 and paid a record $1.8bn fine.

Turns out, Cohen indirectly owns Stamford Harbor Capital. He is to receive as much as 50% of client profits, but won’t have any supervisory role, according to Bloomberg.

“Steve Cohen owns the entity, but consistent with his January agreement with the SEC he will not supervise the activities of anyone working on its behalf,” Jonathan Gasthalter, a Stamford Harbor spokesman, told Bloomberg.

Warren said the SEC’s decision to approve Stamford Harbor makes “a mockery of the SEC’s core mission to ‘protect investors’”, especially considering that in January SEC barred Cohen from “supervising funds that manage outside money until 2018”.

“The commission has permitted a recidivist hedge fund manager, well-known for his former company’s willingness to evade and ignore federal law, to once again profit from – and potentially exploit – investors,” Warren wrote in her letter on Thursday. “This is an unacceptable outcome from the nation’s primary enforcer of securities laws, and it is the latest example of an SEC action that fails to appropriately punish guilty parties, deter future wrongdoings and protect investors.”

When asked about Warren’s letter, the SEC said it will continue scrutinize Cohen’s trading activity.

“As the only law enforcement agency to charge Steven Cohen, the SEC imposed important restrictions, including a supervisory bar plus the additional oversight requirements in the settlement that are even stronger than typical remedies available under the securities law, particularly given the impact of the second circuit’s intervening Newman decision on the charge,” said Andrew J Ceresney, director of the SEC’s division of enforcement.

The 2014 decision by the second circuit court in United States v Newman put a higher burden on the US government agencies to prove a requisite relationship between the tipster and the person receiving the tip. According to the decision, agencies such as SEC would have to prove “a meaningfully close personal relationship that generates an exchange that is objective, consequential and represents at least a potential gain of a pecuniary or similarly valuable nature” between the source and the recipient of the insider information.

“Under the settlement’s significant requirements, the SEC will scrutinize his trading activity closely going forward to protect investors,” Ceresney said.

This is not the first letter Warren has sent to White. Less than a year ago, Warren wrote the SEC chair, calling her a “disappointing” Wall Street cop.

Powered by Guardian.co.ukThis article was written by Jana Kasperkevic in New York, for theguardian.com on Thursday 21st April 2016 20.21 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010


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