With federal prosecutors already sniffing around his trading floor, hedge-fund honcho Steve Cohen is suddenly dealing with stepped-up scrutiny from lawmakers as well.
Two weeks after a jury found Galleon Group founder Raj Rajaratnam guilty of insider trading, Congress is pressing Securities and Exchange Commission chief Mary Schapiro to turn the spotlight on allegations of insider trading at Cohen’s $13 billion hedge fund.
Leading the charge is Sen. Chuck Grassley, a Republican from Iowa and a ranking member of the Judiciary Committee, who sent a letter to the SEC yesterday demanding that the agency explain how it has dealt with suspicious activity tied to the Stamford, Conn.-based hedge fund.
Sources told The Post that Grassley’s investigation was prompted a few months ago by a tipster who indicated that SAC had been the subject of a “high number” of insider-trading referrals from other agencies, including the Financial Industry Regulatory Authority, or Finra.
Grassley is requesting a face-to-face meeting with SEC officials be scheduled by this Friday and has asked for a written explanation of the SEC’s handling of tips related to Cohen’s fund by June 7.
Specifically, Grassley is asking the SEC how it “resolved” tips relating to some 20 trades conducted by SAC dating as far back as 2000.
The senator also wants to know how the high number of referrals about SAC compares to other companies and if the SEC has ever issued a so-called “Wells Notice”– a letter from a regulator informing a company that enforcement action has commenced.
A spokesman for SAC Capital said that the hedge fund takes the senator’s probe seriously and is cooperating with “any and all inquiries.”
While SAC Capital hasn’t been charged with any wrongdoing, the firm has been beset by rumors of insider trading for years.
Federal prosecutors are examining trades made in an account run by Cohen, according to court filings in the case of two former SAC traders.
Donald Longueuil, a trader at SAC through June 2010, and Noah Freeman, a money manager through January 2010, both pleaded guilty to insider-trading charges.
SAC fired the employees for “poor performance” and said it was “outraged” by their actions, which “required active circumvention of our compliance policies and are egregious violations of our ethical standards.”