Pays Record $614Mn Fine.

[ by Melanie Gretchen ]

The Tortoise Finally Caught Up With The Hare.  That only happens in fairy tales, right?  Perhaps, but what's probably closer to the truth is that the hare stopped running to let the tortoise catch him.

And so it goes, the SEC finally pinned insider trading charges on Stephen Cohen and his SAC Capital, after years of tireless pursuit.  The Agency specifically charged two affiliates of SAC Capital with the the charges - CR Intrinsic, which agreed to a $600 million penalty, and Sigma Capital Management, which agreed to a $14 million penalty.

SEC Findings and Allegations.   A CR Intrinsic employee allegedly used material non-public information to trade in shares of drug makers Elan and Wyeth.  That employee, Mathew Martoma, is awaiting trial on civil charges from the SEC and criminal charges from the Justice Department.  Mr. Martoma pleaded "not guilty."  That decision was a significant blow to federal regulators who expected Mr. Martoma to plead guilty and become a prosecution witness. 

Sigma Capital Management employees are charged with allegedly using insider information to illicitly trade in shares of Dell and Nvidia.  Both affiliates are covered by SAC's management company, i.e. not by the investors of the hedge fund.

"The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm." -- George Canellos, Acting Director of the SEC Enforcement Division.

Meanwhile, SAC founder Steven Cohen, was not named in the complaints and thus remains untouched - as far as any wrongful trading.

For further details, go to [Dealbook, 3/15/13].