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Ivy Schmerken
Ivy Schmerken
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Sen. Grassley Pursues Wall Street Titan

Why is a Congressman investigating Steven Cohen of SAC Capital?

A powerful Congressman is investigating suspicious trades by SAC Capital, the hedge fund operated by Steven Cohen, adding to the scrutiny facing the billionaire lately.

Sen. Charles Grassley, Republican senator who heads the Senate Judiciary Committee, reportedly asked FINRA, the regulatory body, for details on the trades, according to the Financial Timesyesterday.

FINRA has turned over documents focusing on trades in the options markets, according to a CNBC video report. FINRA turned over 20 instances of suspicious trading based on the timing or other indicators of the trades, according to CNBC. Grassley asked FINRA for information on the $13 billion hedge fund firm in April.

These are trades related to healthcare, so perhaps this is opening a new front on the investigation. Most of the insider-trading cases to date have related to technology stocks and it was previously reported that Cohen did not trade tech stocks, so he could not have been involved in insider trading.

But why is a Congressman meddling in these regulatory matters? The FT suggests this is a move by Grassley “to keep pressure on regulators to push ahead with scrutiny of perceived abuses in the hedge fund industry.”

Perhaps Grassley is trying turn up the head on regulators’ inquiries at a time when two former portfolio managers, Donald Longueil and Noah Freeman, have been charged as part of the Department of Justice’s investigation into insider trading.

The government has been investigating current and former SAC employees since U.S. prosecutors announced a huge insider trading case involving the Galleon Group in October 2009.

The recent conviction of Raj Rajarnatum, founder of Galleon Group, on 14 charges of insider trading, was the result of a huge government investigation. The Congressman sees an opportunity to catch another Wall Street titan.

Despite all of the rumors and media chatter, SAC Global has not been accused of any improper activities. SAC Global has met with the Congressman's staff and educated them on the firm and its compliance efforts, and “had an appropriate, professional and cordial meeting,” according to a SAC Global spokesman quoted in the FT article.

Striking while the iron is out, Sen. Grassley is also putting pressure on SAC Global just as the hedge fund mogul has emerged as a serious bidder to purchase a stake in the New York Mets baseball team. According to recent comments by owner Fred Wilpon, the team is “bleeding cash” and could lose as much as $70 million this year. Here is a link to the CNBC video.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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