Federal regulators have barred the billionaire investor Steven Cohen from managing commodity hedge funds until 2018, in a settlement that comes on the heels of a similar agreement with the Securities and Exchange Commission.
In January, Cohen agreed to a two-year ban on managing outside money as part of a settlement with the SEC, which had charged him in 2013 with failing to supervise two traders who were later convicted of insider trading.
Commodities regulators based their settlement almost entirely on the SEC’s order. Securities enforcers found Cohen ignored red flags and failed to promptly investigate whether a portfolio manager, Matthew Martoma, was engaged in insider trading. Martoma began serving a nine-year prison sentence in November 2014.
Dan Nathan, a former deputy director of enforcement at the CFTC, said Tuesday’s settlement piggybacked on the SEC’s enforcement action.
“It’s a big deal because of who he is,” Nathan, a partner in the Washington office of Morvillo, said. “The CFTC will routinely bring disqualification actions against individuals based on actions by another agency. Anyone who settles with any agency should be aware that there can be collateral consequences.”
Cohen had long been in the crosshairs of federal regulators and the U.S. Justice Department. His hedge fund, SAC Capital Advisors, pleaded guilty to insider trading charges in 2014 as part of a $1.2 billion criminal settlement. Cohen was not criminally charged.
Within months of the SEC settlement, Cohen opened a new hedge-fund firm, Stamford Harbor Capital L.P., which filed documents with the regulator saying he would comply with the settlement and “not act in a supervisory capacity.”
But his quick return to the industry nonetheless spurred Sen. Elizabeth Warren, D-Mass., to criticize the SEC. Warren in April said Cohen’s comeback “is an unacceptable outcome from the nation’s primary enforcer of securities laws.”
“It is the latest example of an SEC action that fails to appropriately punish guilty parties, deter future wrongdoing and protect investors,” Warren wrote in a letter to SEC Chairwoman Mary Jo White.
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