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from The Great Debate:

Insider traders are still trying to get it right

Sylvester Stallone once told an interviewer about advice he got from Carl Icahn when they were discussing investments. “The dumbest guy on Wall Street is smarter than you,” Icahn warned him. “Keep your money in the bank.”

The stories behind the scores of insider trading convictions since 2007 make me think Icahn might have been wrong.

Three more Wall Street types were busted this week for running an insider trading scheme that spanned five years and involved over a dozen corporate secrets. Their modus operandi -- passing information from lawyer to middleman to trader -- was almost identical to the one used by Matthew Kluger, Kenneth Robinson, and Garrett Bauer, who were arrested in 2011.

In a cinematic twist on detection avoidance, the middleman in this week’s case destroyed evidence by eating the Post-it notes and napkins on which he wrote company names, according to the criminal complaint. Apparently this didn’t work any better than the throwaway phones Kluger, Robinson, and Bauer used when they attempted to avoid detection.

from Bethany McLean:

Is Steve Cohen the real target in this trial?

The fate of Mathew Martoma, the former SAC Capital portfolio manager charged with the biggest insider trade in history -- more than $275 million in profits and avoided losses, says the government -- is now in the hands of a 12-person jury, which began deliberations in a Manhattan courthouse Tuesday afternoon.

But whatever the verdict for Martoma, the trial has been bad news for someone else: Martoma’s former boss, SAC head Steve Cohen. Given the slow, but relentless, nature of the government’s actions against Cohen, it might be worth remembering the old adage: It ain’t over til it’s over.

from Financial Regulatory Forum:

Interview: After SAC, corporate monitor says what makes effective compliance programs

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By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Nov. 13 (Thomson Reuters Accelus) - Last Monday's announcement that the hedge fund SAC Capital Advisors will pay $1.8 billion and hire a compliance monitor to settle insider trading charges highlighted the importance of outside compliance monitors in modern financial services enforcement.

SAC pled guilty on Friday to criminal fraud charges as part of a $1.8 billion deal with the Department of Justice to resolve a decade-long investigation into insider trading at the firm. 

from Bethany McLean:

The folly of trying to level the investment playing field

The government is cracking down on insider trading; isn’t that great news for you? Last Friday, the Securities and Exchange Commission charged hedge fund mogul Steve Cohen with failing to supervise two employees who themselves face insider trading charges; on Thursday morning the Justice Department filed criminal charges against his firm, SAC Capital. Earlier this summer, the news broke that New York’s attorney general, Eric Schneiderman, was investigating the early release (by Thomson Reuters, which publishes this column) of the University of Michigan’s widely-watched index on consumer sentiment to a group of investors. Faced with a court order, Thomson Reuters agreed to suspend the practice, while asserting that "news and information companies can legally distribute non-governmental data and exclusive news through services provided to fee-paying subscribers."

In a statement, Schneiderman said that “the securities markets should be a level playing field for all investors.” Preet Bharara, who is the U.S. Attorney for the Southern District of New York, has also invoked the notion of fairness. He told CNBC’s Jim Cramer, “I think people need to believe that the markets are fair, and that the same rules apply to everyone…I don’t want to buy a stock because I have a feeling that someone knows more than I do.”

from Unstructured Finance:

SEC vs. SAC give rise to many legal theories

It seems everyone has their own pet theory about why the SEC chose now to move against hedge fund titan Steven A. Cohen after years of being part of the hunt along with the FBI and federal prosecutors.

Here are few of them that I got from talking to a number of legal eagles: including former prosecutors and regulators.

from Unstructured Finance:

Stevie Cohen: the pop star edition

Hard to believe, there was a time when Steven A. Cohen was not all that well-known on Wall Street outside of the hedge fund industry. Some even used to confuse the then-paunchy hedge fund trader with a popular magician with the same name.

But it’s true. In fact, a decade ago,  BusinessWeek (pre-Bloomberg takeover) did a cover story about Cohen and his then-$4 billion SAC Capital Advisors, calling  the once super secretive investor, “The most powerful trader on Wall Street you’ve never heard of.”

from Unstructured Finance:

Insider trading—it’s not just hedge funds

Sometimes it seems that insider trading cases are all about hedge funds. After all, the overwhelming majority of the federal government's multi-year crackdown on insider trading has netted dozens of traders and analysts working in the $2.25 trillion hedge fund industry.

But this week's escapades involving a former top audit partner at KPMG and his golfing buddy are reminder that the temptation to profit from inside information exists in many industries and professions.

from Unstructured Finance:

The burden of being SAC Capital’s “Portfolio Manager B”

Michael Steinberg, the SAC Capital Advisers portfolio manager who was arrested at the crack of dawn last Friday morning probably envies former Goldman Sachs trader Matthew Taylor’s rush-hour surrender to the Federal Bureau of Investigation on Wednesday.

While Steinberg was led away in handcuffs as a Wall Street Journal reporter took shaky video footage of the scene outside his door at 6am, Taylor sauntered into FBI headquarters in New York on his own, at 8:30am, having had plenty of time to collect his wits with a cup of hot coffee.

from Unstructured Finance:

Steinberg indictment sheds some light on SAC’s computer program that once annoyed some top traders

By Matthew Goldstein

SAC Select may not have been one of SAC Capital Advisors' best-known portfolios during its brief trading history. But the computer-driven trading program may have been one of the more controversial at Steven A. Cohen's hedge fund.

Setup by a number of SAC Capital's algo- savvy traders, including Neil Chriss, who left SAC in 2007 to found Hutchin Hill Capital, SAC Select was designed to piggyback on the trades on some of the hedge fund's top portfolio managers. SAC Select, which at its peak in 2008 managed about $4.2 billion in hedge fund assets, was discontinued sometime in 2009 or early 2010. The strategy was intended as an added investment benefit for long-time SAC Capital clients.

from Breakingviews:

Maybe SAC should forget about other people’s money

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By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Maybe SAC Capital should forget about managing other people’s money. Steve Cohen’s $15 billion hedge fund firm is paying a whopping $616 million to settle Securities and Exchange Commission insider trading charges. It would be an ignominious time to follow legends like Stanley Druckenmiller, but Cohen is already losing over a quarter of some $6 billion of outside investor funds this year. It could be time to focus mainly on looking after his own cash.

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