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SAC Capital Issued Wells Notice View Count: 41

In a report from Reuters, the United States government has threatened to file civil securities fraud charges against SAC Capital Advisors. The government is also tightening things related to Steven A. Cohen, the creator of the $14 billion hedge fund. On Wednesday, Cohen and another top SAC executive told investors that the Securities and Exchange Commission issued a Wells notice to the company, according to sources who listened in on the conference call.

The investors were told of the Wells notice just days after Mathew Martoma was arrested. Martoma is the fund’s former portfolio manager and the fifth person charged with insider trading in association with the fund. Cohen has not been accused of doing anything wrong.

SAC President Tom Conheeney said during the conference call that the firm is going to cover all of the costs to defend itself against legal action taken. He also said that the SEC questioned Cohen about the issue earlier in 2012 and that he was responsible to the questions from the government officials working the case.

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Jonathan Gasthalter, a spokesman for SAC, said, “Mr. Cohen and SAC are confident that they have acted appropriately and will continue to cooperate with the government’s inquiry.”

The FBI began investigating SAC on an intermittent basis since 2007. The chief investment officer for Offit Capital Advisors, Todd Petzel, said that his company never invested with SAC because the firm has a lack of transparency.

“SAC will tell you that they have incredibly rigorous compliance process,” Petzel said. “I’m sure if this ever comes to court they will demonstrate in court all the training that every one of their portfolio managers goes through.”

Stephen Crimmins is a partner for K&L Gates in Washington. Crimmins said, “Certainly the Wells process and the public disclosure that there is a Wells process with respect to a hedge fund is something that is very challenging for the management of the hedge fund. It’s a period of intense activity. It’s a period that usually doesn’t last that long, so we should expect some more news from SAC.”

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