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Breaking News from CNBC's Kate Kelly: Citigroup's Private Bank Puts SAC on Watch on Its Hedge Fund Platform

When: Today, Wednesday, December 5, 2012

Where: CNBC's "Fast Money Halftime Report"

Following is the unofficial transcript of breaking news from CNBC's Kate Kelly. Following is a link to Kate's story on CNBC.com: http://www.cnbc.com/id/100280611.

All references must be sourced to CNBC.

SCOTT WAPNER: IS MORE TROUBLE AHEAD FOR EMBATTLED HEDGE FUND SAC CAPITAL? KATE KELLY IS HERE WITH THE LATEST ON THE FALLOUT FROM THE INSIDER TRADING ALLEGATIONS. KATE, IT IS GOOD TO SEE YOU AGAIN. YOU'VE BEEN WORKING THIS STORY HARD. WHAT DO YOU GOT NOW?

KATE KELLY: GOOD TO SEE YOU TOO, SCOTT. I HAVE, I'VE BEEN WORKING THE PHONES AND WE'VE JUST LEARNED THAT CITIGROUP'S PRIVATE BANK HAS PUT SAC ON WATCH ON ITS HEDGE FUND PLATFORM. SIMILAR TO WHAT MORGAN STANLEY RECENTLY DID IN LIGHT ON THE NEWEST INSIDER TRADING CASE AGAINST A FORMER SAC TRADER. I'M TOLD THAT PUTTING A HEDGE FUND ON REVIEW AT CITI – WHICH MEANS THE BANK IS MONITORING THE SITUATION – AND MAY OR MAY NOT REMOVE SAC FROM ITS INVESTOR PLATFORM, IS SOMETHING THE BANK DOES TEND TO DO WHEN A FUND IS FACING ANY SORT OF NEWS EVENT, MUCH LIKE A STOCK. STILL, THE LATEST STEP HERE HEIGHTENS THE PRESSURE ON SAC, WHOSE FOUNDER, STEVE COHEN, HAS NOW BEEN PERSONALLY IMPLICATED IN A GOVERNMENT CASE DESCRIBING ALLEGED INSIDER TRADING OF TWO PHARMACEUTICAL STOCKS. CNBC WAS THE FIRST TO REPORT ON AN INVESTOR REDEMPTION THE VERY NIGHT THE CASE WAS FILED AND SINCE THEN, AT LEAST ONE OTHER BIG MONEY MANAGER – A UNIT OF SOCIETE GENERALE – HAS FOLLOWED SUIT. OTHER INVESTORS ARE SHOWING CONCERN WE ARE TOLD AND WE MAY SEE MORE OUTFLOWS IN THE FIRST QUARTER GIVEN THAT THE NEXT REDEMPTION DEADLINE IS AROUND FEBRUARY 15TH. IN SPITE OF IT ALL THOUGH, SAC CONTINUES TO PERFORM REMARKABLY WELL. CNBC HAS JUST LEARNED THE HEDGE FUND'S FLAGSHIP IS UP NEARLY 12 PERCENT YEAR-TO-DATE THROUGH NOVEMBER, AGAINST AN AVERAGE HEDGE FUND RETURN OF ABOUT TWO, MAYBE THREE PERCENT OVERALL. ADD TO THAT THE FACT THAT COHEN WHO HAS SAID HE'S CONFIDENT THAT HE AND HIS COMPANY HAVE BEHAVED APPROPRIATELY, OWNS MORE THAN HALF OF SAC'S 14 BILLION IN ASSETS UNDER MANAGEMENT, SCOTT. AND THERE IS STILL QUITE A LOT ARGUING FOR THESE GUYS.



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