Ron Geffner, partner at Sadis & Goldberg, agreed with Frenkel in a separate CNBC interview, saying it's "not a wonderful case." But he called it "novel," because the potential punishment of a lifetime ban "does not fit the alleged crime."
Cohen has "20 days to respond," another former SEC attorney Teresa Goody, managing director and COO at Kalorama Partners, said on the show. But she said she thought the agency has a "very strong case." She also called it clever, but didn't consider it novel.
The civil charges, an administrative matter, will be adjudicated by the SEC. The first chance for any appeal outside the agency would be the U.S. Court of Appeals in Washington, D.C., where the "SEC has not met with much success certainly in recent years," Frenkel said.
He also said the case "really calls into question the wisdom of cooperating with the SEC," because SAC had agreed to pay a record $616 million penalty in March to settle a separate SEC lawsuit arising from an investigation of trading on illegal information.
Following the timeline, a month later, lawyers for SAC made a case to U.S. prosecutors and FBI agents for why authorities did not have enough evidence to charge Cohen with either insider trading or any other securities law violation. Cohen was subpoenaed shortly after that meeting to testify before a federal grand jury, where he invoked his Fifth Amendment right against self-incrimination.
The office of Preet Bharara, the U.S. Attorney for the Southern District in Manhattan, has declined to comment on the SEC charges. And before Friday's action—during last week's Delivering Alpha Conference presented by CNBC and Institutional Investor—Bharara wouldn't address SAC directly either. But he warned about financial cases in general, saying "no one is too big to jail."
(Read more: No one is too big to jail, Wall Street cop says)
Whether Cohen will ultimately face criminal charges, Frenkel said to "look at the example" of Rajat Gupta, the former Goldman Sachs director charged in the insider trading investigation of Raj Rajaratnam's Galleon Group. "The SEC brought an administrative action against Gupta," Frenkel recalled, "and within 30 days, the next thing you know, there's a criminal indictment."
Last week, Gupta was ordered to pay a $13.9 million penalty. He was also banned from serving as an officer or director of a public company for having illegally passed corporate secrets to Rajaratnam—who himself is serving an 11-year sentence for masterminding the biggest hedge fund insider trading scheme in U.S. history. Rajaratnam has also been ordered to pay a $92.8 million penalty.
(Read more: Ex-Goldman director Gupta fined, banned in SEC case)
—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC. Reuters also contributed to this report.