After the administrative judge issues a ruling, the SEC makes the final determination, evaluating the facts supporting the allegations. Cohen may appeal to the federal appeals court in Washington, which handles such regulatory matters.
But unlike if he were sued by the agency, Cohen won’t be entitled to evidence collected by the government, a distinct advantage if its only goal is to put him out of business.
SAC spokesman Jonathan Gasthalter has said the agency’s action against Cohen “has no merit.” Kevin Callahan, a spokesman for the SEC, didn’t return a call seeking comment.
SAC oversees $15 billion, about 60 percent of which is money from Cohen and employees. Cohen, whose net worth is estimated at about $9 billion by the Bloomberg Billionaires Index, has returned 25 percent a year in his funds since founding his firm in 1992, after taking half of the profits in fees, a record unsurpassed by other equity hedge-fund managers.
Martoma, Steinberg
SAC portfolio manager Mathew Martoma, 39, was charged by the U.S. in November with insider trading. Prosecutors accused him of helping Cohen’s Stamford, Connecticut-based hedge fund reap at least $276 million by trading on illicit tips about an Alzheimer’s drug. SAC’s Michael Steinberg, 41, was indicted in March by a federal grand jury in Manhattan for allegedly earning
more than $1.4 million by trading on illegal tips about Dell Inc. and Nvidia Corp.
Both men, who were also sued by the SEC for insider trading, have pleaded not guilty in the criminal cases brought by Manhattan U.S. Attorney Preet Bharara, and are scheduled to go to trial separately in November.
Regulators alleged Cohen, 57, ignored the suspicious actions of his subordinates and signs that pointed to malfeasance, in a failure to properly supervise that allowed the alleged illegal trades to take place.
In the administrative action, the agency for the first time described Cohen’s alleged personal involvement in trading activities with the two subordinates, including a claim that Cohen sold off hundreds of thousands of shares of Dell in August 2008. The SEC said the sale came after Steinberg sent Cohen an e-mail that the U.S. alleged included nonpublic information about the company’s disappointing earnings set to be reported days later.