Steve Cohen’s SAC Capital Advisors has one of the best investment records on Wall Street — but the more regulators sniff around the Greenwich, Conn., firm, the more it seems they may have had some unfair help.
On Thursday, the top state regulator in Massachusetts announced it fined Citigroup $30 million because Kevin Chang, one of its tech analysts, leaked selective parts of an unpublished and confidential Apple-related research report to some institutional clients.
Among the clients getting the unfair peak? Cohen’s SAC Capital.
Chang, according to the settlement hammered out between Citigroup and the Massachusetts Secretary of State, came under “heavy pressure” from “inside and outside” the bank, including from large hedge funds, last Dec. 13 for information on Hon Hai Precision Industry, an assembler of Apple iPhones.
The report, which wasn’t shared with the wider public for three days, contained info on weak iPhone sales.
In the leaked report, Chang took down his first quarter 2013 iPhone sales estimates from 45 million units to 33 million units, according to the settlement.
On Dec. 13, 2012, Apple shares closed at $529.69. Within three months, in part based on underwhelming iPhone sales data, the tech titan’s shares were down to $420.
The report was also leaked to T. Rowe Price, Citadel and GLG Partners. None of the firms were named in the 32-page consent order filed against Citigroup.
SAC, T. Rowe Price and Citadel sold Apple stock on Dec. 13 and 14, the regulator said.
“Due to Kevin Chang’s release of his research views prior to publication, he had to publish his research report early, but not before his revised Apple iPhone production estimates were communicated to the four clients,” Secretary of State William Galvin said in a statement.
The Hon Hai research report contained significant cuts in Apple iPhone production numbers and would have a detrimental impact on Apple, he said.
Two days after SAC and the others got the early peak at Chang’s research, Citigroup lowered its rating on Apple from buy to neutral.
A Citi spokeswoman told Reuters the bank takes “regulatory compliance requirements very seriously and train all of our employees about these obligations. We are also constantly working to improve, manage and monitor the compliance and controls process.”
Meanwhile, SAC last March paid $616 million to settle a Securities and Exchange Commission probe into insider trading at the huge hedge fund. Cohen’s fund did not admit or deny wrongdoing.
That settlement is subject to court approval.
Also, SAC faces criminal insider trading charges. It maintains it has done nothing wrong.