December 3, 2020

DealBook: New Scrutiny for S.E.C. and Trades at SAC Capital

Steven A. Cohen, the billionaire who runs SAC Capital Advisors.ReutersSteven A. Cohen, the billionaire founder of SAC Capital Advisors.

6:40 p.m. | Updated

Senator Charles E. Grassley, Republican of Iowa, has stepped up his inquiry into trading at the hedge fund SAC Capital Advisors.

In a letter sent Tuesday, Mr. Grassley asked the Securities and Exchange Commission to explain how it handled past referrals about SAC’s trading activity.

Mr. Grassley is examining 20 stock trades by SAC that were provided to him by the Financial Industry Regulatory Authority, Wall Street’s own regulatory body. Last month, Mr. Grassley asked the agency, known as Finra, for information about the “potential scope of suspicious trading activity” at the hedge fund, which is run by the billionaire investor Steven A. Cohen out of Greenwich, Conn.

The SAC transactions, which took place after Jan. 1, 2000, had been previously referred to the S.E.C. by Finra. They included stock sales and purchases made around the time of merger announcements or other market-moving events. Mr. Grassley did not provide details about which SAC trades were involved, at the request of the investigative agencies.

Mr. Cohen’s firm, which manages about $12 billion in assets, has become entangled in the government’s insider trading investigation at hedge funds. Two SAC portfolio managers pleaded guilty this year to making illegal trades based on confidential information. Neither SAC nor Mr. Cohen has been accused of wrongdoing. A spokesman for the firm has said that SAC was “outraged” by the conduct of the two portfolio managers, Noah Freeman and Donald Longueuil.

Mr. Grassley has been a leading critic of the S.E.C., saying it was not vigilant enough in protecting investors, including the agency’s failure to uncover frauds like the Ponzi scheme perpetrated by Bernard L. Madoff. In 2009, the senator pursued a similar inquiry to the one involving SAC when he examined Pequot Capital Management, a prominent hedge fund that has since shut down.

Mr. Grassley asked Mary L. Schapiro, the S.E.C. chairwoman, to respond to his recent request by June 7 by providing a written explanation as to how the S.E.C. had resolved Finra’s referrals, how the number of referrals compared with other hedge funds and whether a so-called Wells notice had ever been drafted with regard to any of the referrals. A Wells notice from the S.E.C. is an indication that the agency is considering an enforcement action.

“The function of Congressional investigations is not to establish whether any private firms have violated the law, but rather to examine particular facts and circumstances in order to assess how well the agencies created by Congress are executing the authorities granted to them,” Mr. Grassley wrote in his letter to Ms. Schapiro. “Looking into specific examples is essential for Congress to understand how effectively the S.E.C. pursues referrals such as these.”

This month, SAC executives 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.

Article source: http://feeds.nytimes.com/click.phdo?i=5f13c26eb156af48a2ffd14344c1d19d