The rules according to hedgefund billionaire Steven Cohen

November 13, 2013

When it comes to complying with the rules that govern insider trading, wildly successful hedgefund manager Steven Cohen says “I rely on my counsel.”

Frontline PBS has posted video from Cohen’s pretrial deposition for a civil suit filed by Canadian insurer Fairfax Financial Holdings in 2011. The drama turns around the around the interpretation of rule 10b-5, a provision that restricts trading on the basis of material nonpublic information. While SAC has elsewhere claimed to have a strong ‘culture of compliance’, Cohen says he cannot remember whether he’s ever read the compliance manual. 

Depositions are part of the process of discovery in which both parties to a dispute interrogate witnesses to produce evidence. Everything said is recorded, but depending on how the lawyers make their arguments, not everything will be admissible in court. Note Cohen’s lawyer repeatedly objecting off camera to the form of the question being put to the witness.

Cohen’s hedge fund, SAC Capital Advisors, has just settled a civil case with the SEC for an unprecedented $1.8 bn. The firm has plead guilty to five counts of securities and wire fraud. For two summaries of the SEC’s case see Institutional Investor and the article by James B. Stewart at the New York Times (with video). 

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