Hedge fund impresario Steven A. Cohen has signaled that he’s looking to expand his trading activities in Asia, the latest indication that the former head of SAC Capital thinks he can return to managing money for outside investors after a series of regulatory issues barred him from the securities business for the past two years, the FOX Business Network has learned.
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Recruiters have been telling potential new hires that Cohen, who now manages only his own money through a so-called family office named Point72 Asset Management, is weighing whether to add both new traders and support staff in his Asia offices, according to people with direct knowledge of the matter. Cohen recently re-opened his London office, which was shuttered in 2013 amid regulatory scrutiny of his trading activities. In addition to having offices in New York and London, Point72 operates in Hong Kong, Singapore, and Tokyo.
The move, according to people with knowledge of the matter, is significant because it’s one of the strongest indications to date that Cohen is looking to get fully back into the hedge fund business and managing money for outside investors, not just his own massive net worth of about $12 billion. At his height, Cohen had $16 billion in assets under management but a chunk of that money from pension funds and wealthy individuals left the hedge fund in 2013 after SAC reached a settlement with the U.S. Justice Department.
The firm pleaded guilty to criminal insider trading charges, paid $1.8 billion in fines and was forced to shut down. Meanwhile, regulators at the Securities and Exchange Commission filed civil charges against Cohen for failing to supervise employees who committed insider trading and sought a lifetime ban from the securities industry, effectively barring him from managing anything but his own wealth in what’s known as a family office.
Cohen has denied the charges and a recent decision by a federal appellate court has given him hope that he can both beat the SEC charges, and get back into the business of managing outside money in the coming years, people who are familiar with Cohen’s thinking tell FOX Business.
With that, Cohen has indicated that he will be hiring people in both Asia and London to beef up his operations if and when he can begin taking in outside money, these people say. Though the exact numbers are unclear, those positions include both traders and support staff such as human resources, they add. “They can only manage Cohen’s money for now, but they think that might well change,” said one person who met with a recruiter on behalf of Point72. “That’s why they are staffing up.”
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A spokesman for Point72 said, “Point72 is a family office and has no plans to take in outside capital.” The spokesman would not deny the expansion plans, or that Cohen himself is looking to return to managing outside money once he’s freed of the regulatory charges.
One obstacle for Cohen is the SEC, which won’t approve Point72 advisory status until the failure to supervise case is resolved. Getting SEC approval is essential for Cohen to fully return to the hedge fund business.
But people who know Cohen say the trader believes he will return to the hedge fund business in the coming years after a U.S. Appeals Court in New York last year significantly altered what constitutes insider trading, broadly defined as trading stocks based on material non-public information. The court ruled that traders must know the information was illegally obtained, and they must confer a benefit of some monetary value to the person tipping them off to information that can move a stock in their favor. The ruling took on even greater significance after the U.S. Supreme Court in October refused to review the ruling.
The decision reversed several convictions of insider traders, including former SAC Portfolio Manager Michael Steinberg. The reversal of the Steinberg conviction is crucial to Cohen because it makes up half of the SEC failure to supervise case, which alleged that Cohen failed to properly monitor Steinberg’s trading activities.
With Steinberg’s case dropped, some legal analysts say it will be much more difficult for the SEC to convince the courts to agree to their lifetime bar for Cohen. The other part of the failure to supervise case involved the alleged insider trading activities of former SAC Trader Mathew Martoma, who is now serving nine-year prison sentence.