Eugene Grygo, Chief Content Editor, FTF News
Former hedge fund heavyweight Steven A. Cohen, who has just settled with the SEC, could return to managing other people’s money again in 2018. However, an internal memo that he penned and which was obtained by FTF News, indicates that Cohen may not automatically return to the fray.
In the memo, Cohen acknowledges that he has “resolved the administrative case filed by the SEC against me two years ago.”
To quickly recap, the SEC has been pursuing Cohen for quite some time and in his settlement with the regulator he avoids a once-possible lifetime ban from trading. In fact, according to the deal, Cohen is “prohibited from supervising funds that manage outside money … in order to settle charges for failing to supervise a former portfolio manager [Mathew Martoma] who engaged in insider trading while employed at his firm.”
In addition, before this latest action, his firm, S.A.C. Advisors, agreed to a $1.2 billion guilty plea in 2013, and Cohen announced that he would be managing his own fortune. He then transformed S.A.C. into Point72 Asset Management, his family office firm, based in Stamford, Conn.
With only two short years to wait, the general impression is that Cohen is counting the hours before he can return. Yet in his memo to staff at PT72, he indicates that it’s no guarantee.
“Having the opportunity to accept outside capital again does not necessarily mean we will,” Cohen says in the memo. “Our firm has focused on generating replicable and sustainable high quality returns that yield prudent growth and we will continue to do so for the next two years. Should we become a registered investment adviser in the future, we will maintain our focus on delivering superior risk-adjusted returns, not accumulating assets and fees.”
At the same time, “if Cohen becomes associated in a supervisory capacity with an entity that is a registered broker, dealer, or investment adviser in 2018 or 2019, that entity will retain an independent consultant through Dec. 31, 2019,” according to the SEC statement about the deal with Cohen.
Cohen stresses that the firm will avoid becoming complacent about regulatory compliance. “We will remain industry leaders — not followers — in compliance. Doing so requires each of us to continue to adhere to these high standards, every day, without exception.”
He also touts “sweeping changes during the past two years,” such as the new management team “that shared my vision for strengthening our culture and for closely managing smaller groups of teams.” He is also proud of a “modernized compliance team that redefined the state of the art in the industry.” He also cites “a surveillance program that protects our firm and our employees every day from external sources of information that do not meet our high compliance standards.”
Underscoring the new culture of compliance, the firm has undergone two external reviews by independent compliance consultants, and has developed a culture “that requires all of us to ceaselessly act with integrity and civility and to work together with mutual respect.”
The firm has also “aligned our compensation system to reward what matters — replicable and sustainable returns that can only be the product of rigorous fundamental research.”
Whatever happens in two years, Cohen appears eager to get the past behind him, which he alludes to when he addresses why he decided to settle with the SEC rather than continue the legal battle.
“Inevitably, some will ask why I agreed to settle,” Cohen writes in the memo. “The longer the pending litigation lingered, the more it distracted from the world-class firm that we are building. Resolving the case gives us certainty and opens a path to raising outside capital in the future if we believe that is in best interest of the firm.”
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