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SAC Capital: SEC Shatters Record for Largest Insider Trading Fine

Posted in SEC Enforcement Cases

Last week, the SEC reached a settlement with CR Intrinsic Investors, LLC, which tore up the record books on insider trading cases.  CR Intrinsic, an affiliate of SAC Capital, agreed to pay over $600 million to settle charges of using nonpublic information about clinical pharmaceutical trials to earn profits of over $274 million.  

As an affiliate of SAC Capital, one of the nation’s largest investment firms, the ongoing investigation of CR Intrinsic was highly publicized.  There were speculations that the investigation’s true target was SAC Capital CEO Steve Cohen. SAC was eventually named as a relief defendant in the case, putting them on the hook directly to pay back profits earned from the scheme. 

The settlement, which requires $274 million in disgorged profits, another $274 million as a penalty, and $52 million in interest, dwarfs the SEC’s previous high-water mark for insider trading, the $157 million paid by Raj Rajaratnam.  Another SAC affiliate, Sigma Capital, settled insider trading charges earlier in the week for $14 million, bringing the total fine levied on the SAC group to $616 million.   For more, The Economist’s blog wonders about the wider implications.