After having been found guilty of insider trading in 2013, one of the world’s most reputable hedge funds will no longer be providing management services after its license under the CFTC was removed. US authorities governing financial derivatives issued a notice against SAC Capital, resulting in the watchdog revoking its license. The hedge fund has paid $1.2 billion in penalties and will cease trading under its two regulated entities.
Wall St. veteran Steven A. Cohen’s SAC Capital, a leading hedge fund established in 1992, has seen its active trading license under the CFTC come to a standstill. The hedge fund was found guilty by the SEC for market abuse and manipulation last year. According to the notification on the CFTC website: “The Order immediately revoked SAC LLC’s registrations with the CFTC as a Commodity Trading Advisor (CTA) and Commodity Pool Operator (CPA). The Order also revoked effective December 31, 2015, SAC LP’s registrations as a CTA and CPO.”
SAC was classified as one of the largest fund managers, recognized for its distinct returns of twenty five percent after fees. The current resolution follows from a similar action by the SEC earlier this year.
SAC was regarded as Wall St’s brainchild after its performance outshined the market. Since pleading guilty in 2013, the firm has returned funds to its clients. However, the firm has altered its business and changed its legal status to a Family Office, an operation that is outside the regulatory framework in the USA. The firm changed its name to Point72 Asset Management, and is reported to be managing Mr. Cohen’s own wealth.
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Last week, a former employee at the firm, Matthew Martoma, faced a lengthy prison sentence after being accused of profiting from a $275 million insider trading scheme between 2006 and 2008. Mr. Martoma was jailed for nine years.
SAC’s involvement in the insider trading case puts undue pressure on the buy-side as investors have been pulling back from financial markets after the popular Madoff case, followed by the recent mishaps with the LIBOR and FX Fixings issues.
Additional details in the CFTC notice state: “ The criminal charges against SAC LP and SAC LLC in that action alleged, among other things, that multiple employees and agents of those entities, over the course of several years, obtained material, nonpublic information relating to publicly-traded companies and executed, or caused the funds managed by those entities to execute, securities trades based on that information.
In their guilty pleas, SAC LP and SAC LLC admitted that at least one of their respective employees engaged in insider trading within the scope of their employment and for the benefit of the respective employer.”