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The sharks of the US Attorney’s office have SAC Capital Advisors surrounded — and owner Steven Cohen is looking a lot like chum.
Good thing the billionaire hedgie has a large supply of shark repellent.
That would be Peter Nussbaum, SAC’s longtime general counsel who, over his 12 years at the Stamford, Conn., firm, has built up an impressive 30-person compliance department — not including an additional tech compliance team.
“Nussbaum is the most respected person at SAC,” said a hedge fund executive not at SAC. “He is going to do what he thinks is best for the firm and not be cowed by anyone.”
Nussbaum’s huge compliance department, observers said, was built, in large part, because of the perception that the government was determined to bust Cohen.
That much has become clear this week.
Former SAC portfolio manager Mathew Martoma was arrested on Tuesday, the sixth former SAC employee caught up in the feds insider-trading probe. Martoma denies any wrongdoing.
The criminal and civil complaints against Martoma mention — but do not charge — Cohen for his role in what the feds say is the biggest insider trade ever, worth $276 million.
SAC and Cohen have denied wrongdoing and said they are continuing to cooperate with the government.
While SAC is not making the eye-popping returns it did in earlier days, it has outperformed many rivals with a 10 percent gain this year.
The performance and Nussbaum’s division have kept many investors mollified over the years.
“They have as impressive a compliance infrastructure as we’ve seen in thousands of managers,” said one investor, whose firm decided it could not risk scandal and pulled capital from SAC in 2011.
The decision was made after two former SAC traders, Donald Longueuil and Noah Freeman, were indicted — and later pleaded guilty — for insider trading crimes committed while at SAC.
Following the 2011 arrests, SAC’s compliance team told investors it had tightened its rules, sources said, and was using surveillance tools that mimic those of the SEC, introducing quantitative pattern, counter-party and trading analysis.
SAC already forbade portfolio managers from speaking with individuals who work at public companies. By 2007, SAC had policies governing expert networks — where most insider trading tips have come from in recent years.
After the 2011 arrests, SAC said it was “all over” portfolio managers who have suspicious trading or are getting a lot of earnings or drug results right, an investor said.
That would have been too late to stop Martoma. In 2008, he allegedly received the tip — that a drug trial for a treatment of Alzheimer’s wasn’t looking good — from a doctor involved in the drug trials.
After Martoma made a 20-minute call to Cohen, the hedge fund chief began ordering a rapid unwind of trades.
The arrest of Martoma, who is expected to appear in Manhattan federal court on Monday, has refocused attention on Cohen.
And that means it must be a busy weekend for Nussbaum.
The former Schulte Roth lawyer better stay on top of his game.
The sharks have sharp teeth — and they look hungry.