June 19, 2024

DealBook: Grassley Investigating Trades Made by SAC Capital

Senator Charles E. Grassley, Republican of Iowa, is examining 20 stock trades by the hedge fund SAC Capital Advisors, a spokesman for the lawmaker said Saturday.

The inquiry is the result of a letter sent by Mr. Grassley on April 26 to the Financial Industry Regulatory Authority asking it to provide information on the “potential scope of suspicious trading activity” at SAC, the hedge fund run by the billionaire investor Steven A. Cohen.

Mr. Cohen’s firm, one of the largest hedge funds in the world, has become ensnared by the government’s vast investigation into insider trading at hedge funds. The investigation resulted in the conviction earlier this month of Raj Rajaratnam, the head of the Galleon Group.

As part of an investigation separate from the one involving Mr. Rajaratnam, two SAC portfolio managers have pleaded guilty to making illegal trades based on secret corporate information. Neither SAC nor Mr. Cohen has been charged with any wrongdoing. A firm spokesman has said that SAC was “outraged” by the conduct of the two portfolio managers, Noah Freeman and Donald Longueuil.

Steven A. CohenSteve Marcus/Reuters SAC Capital Advisors, run by Steven A. Cohen, is one of the largest hedge funds in the world.

In his letter to the financial authority, known as Finra, Mr. Grassley, the ranking Republican on the Senate Judiciary Committee, said that “while SAC Capital itself has not been charged, these allegations raise serious questions about the corporate culture at SAC Capital and undercut investor confidence in a fair and balanced playing field.”

Finra provided Mr. Grassley with details of SAC’s trading last week. The stock transactions were made over the last decade and previously were referred to the Securities and Exchange Commission. They included trades made around the time of merger announcements or other market-moving events.

News of the SAC trades that Finra provided to Mr. Grassley was first reported by The Wall Street Journal.
Earlier this month, SAC executives, including Peter Nussbaum, the firm’s top lawyer, and its outside counsel met with staff members in Mr. Grassley’s office to discuss his inquiry.

“We welcomed the opportunity to meet with the staff to educate them about the firm and our compliance efforts, and had an entirely appropriate, professional and cordial meeting. We will continue to cooperate in any way we can,” SAC said in a statement provided Saturday by a firm spokesman.

Mr. Grassley’s aggressive stance toward SAC follows the senator’s past criticism of the S.E.C. for not being vigilant enough in its pursuit of illegal activity on Wall Street, including its failure to uncover frauds including Bernard L. Madoff’s Ponzi scheme. Now Mr. Grassley’s attention has turned to insider trading.

“The use of nonpublic information for insider trading purposes is sadly alive and well in our nation’s financial markets,” Mr. Grassley wrote in his letter to Finra. “More must be done to investigate and bring these criminals to justice.”

Article source: http://feeds.nytimes.com/click.phdo?i=db0db0306c233454d1df7f8460641096

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