Steven Cohen, Point72Hedge fund manager Steven Cohen will be prohibited from supervising funds that manage outside money until 2018, the US Securities and Exchange Commission (SEC) announced Friday.
The ban is to settle charges that Cohen failed to supervise a former portfolio manager who engaged in insider trading while employed at his firm, SAC Capital, the SEC said. Cohen neither admitted nor denied these charges.
“Before Cohen can handle outside money again, an independent consultant will ensure there are legally sufficient policies, procedures, and supervision mechanisms in place to detect and deter any insider trading,” said Andrew Ceresney, director of the SEC’s enforcement division.
Cohen’s current family office Point72 Asset Management will also be subject to SEC examinations. All branches of the firm will be required to retain an independent consultant to conduct periodic reviews of their activities and ensure compliance with securities laws.
If Cohen becomes associated in a supervisory capacity with a registered broker, dealer, or investment adviser in the two years following the sanction, that entity will also be required to retain an independent consultant through the end of 2019.
“The strong combination of a two-year supervisory bar and additional oversight requirements achieves significant and immediate investor protection and deterrence, while ensuring that the activities of his funds are closely monitored going forward,” Cerseney said.
The SEC charged Cohen in July 2013 with failing to supervise portfolio managers Matthew Martoma and Michael Steinberg, who were both accused of engaging in insider trading at affiliate firms of Cohen’s at affiliate firms of SAC Capital—since rebranded as Point72.
While the charges against Steinberg were dismissed, Martoma was found guilty and was sentenced to nine years in jail in September. He is the seventh former employee of Point72 to be convicted of insider trading.
According to the SEC, Cohen “ignored red flags that should have caused him to take prompt action to determine whether Martoma was engaged in insider trading.”
Instead, the US regulator said Cohen “permitted Martoma to make trades based on that information,” while placing similar trades in accounts that he controlled. Cohen also “encouraged Martoma to talk to a doctor about nonpublic drug trial results to inform trading decisions.”
Based on these trades, the SEC said Cohen’s hedge funds earned profits and avoided losses of approximately $275 million.
Related: Former SAC Manager Handed Nine-Year Jail Term & SAC Capital Starts Anew as Point72