SAC Capital founder Steve Cohen told investors Thursday morning that the hedge fund would impose compensation clawbacks on scofflaws and drastically limit SAC's contact with public company workers as a way of discouraging future misconduct in the trading of stocks.
In a frank letter that contained some of his most expansive commentary yet on the insider trading probe that has engulfed his firm, Cohen laid out a new and stricter compliance regime intended to "deter conduct that would threaten the integrity of the firm."
As part of the effort, SAC will expand its compliance team from 36 people to 45, ban most contact with public company employees who are not members of senior management or investor relations, limit the use of "expert networks" (stock specialists who provide deep research on public companies), and, finally, claw back the pay received by a trader or analyst later discovered to have prompted regulatory or criminal sanctions.
"We want to let job applicants know that if they do not intend to play by the rules they should not come to SAC," Cohen wrote in the letter. The new policy "sends a clear message about how critically important it is to meet the highest compliance standards and how utterly serious we are about deterring unacceptable or unwanted conduct." Should additional regulatory issues arise, Cohen added, SAC's senior management will be cut too.
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Cohen has limited his public comments of late to brief remarks on investor calls, handing the reins quickly to Tom Conheeney, the firm's president. But in Thursday's letter, he made his most substantive commentary yet on the years-long Justice Department investigation that has ensnared numerous current and former SAC employees with allegations of insider trading and implicated Cohen in a set of allegedly improper trades from 2008. Cohen has said he did nothing wrong.
"We have been buffeted for many months by news of SAC employees who have pleaded guilty to, or have been accused of, insider trading," he wrote. "We have endured speculation that somehow this conduct is acceptable to the firm, its senior management and to me. It is not, nor has it ever been."
In tandem with the letter's issuance, Cohen held a meeting with SAC staff Thursday morning to outline the new rules, says someone familiar with the matter. Employees consider the letter to be Cohen's signal to prosecutors that he is taking the probes seriously, this person adds.