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Columbia Law School professor John Coffee on the SEC insider-trading case against SAC Capital Advisors.
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You very much.
What -- yeah.
Revelations coming out of SEC capital founder sitcoms conference call with investors this morning.
Was at a Securities and Exchange Commission is considering filing civil fraud charges against his hedge fund.
Over insider trading violations what does this mean for -- -- for SEC capital Charlie Gasparino and especially -- at a time provide few -- a source Charlie techno.
Special -- of course is the great John Coffee there's no better authority on insider trading what it means that that you engage in the practice but you know a lot about the who's who do.
Engages in nice to see again John.
Our pleasure kind of interesting statement coming out of this I think a lot of it was perfunctory you know you meet -- -- investors that -- -- -- -- in the news obviously for.
You know people been under investigation for insider trading including the recent revelation -- -- -- -- -- but here's what.
And SEC SAC.
Officials said during a press conference he says SAC has received notice from its from the staff of the SEC.
That the commission could bring charges against.
SEC capital -- and a control -- person as part of its and its investigation.
-- insider trading that is that notices as you know John Wells notice -- enforcement staff as it referred to the full commission that civil fraud charges can be filed.
Let's play this forward usually nine times that attend the -- the staff's recommendations are heated by the commission there's a fuss by in the civil fraud charges.
Does that mean that SEC capital could be seen its final days on you know as as a as a registered hedge -- at the very least.
Well I don't know that's going to happen do understand that most wells notices.
Produce a settlement even before the commission votes -- -- But wells notice is really an invitation.
Rendered to settlement talks.
The unique thing about SA Citi.
Is it's about 60% or more own.
By its owner -- Steven -- so there's going to be quite the same run on the bank problem that would arise and other hedge funds where investors would demand redemption.
My understanding is no one can redeem here till sometime in about February -- of the crisis -- both phone to that extent.
But it doesn't surprise me that the SEC is following along the criminal investigation.
The government in the Department of Justice have got to prove this beyond a reasonable doubt.
The FCC only have to prove by preponderance of the evidence that it looks like there might have been insider trading they don't approve of mr.
Cohen was involved at all.
One of the interest in things when you look at its -- is out there this isn't completely similar but it's.
It's intra scene in -- in the approach when Goldman Sachs was hit -- -- civil fraud charge by the SEC.
Couple years ago -- that abacus trade -- -- the allegedly fraudulent sale of mortgage backed securities to unsuspecting investors.
One of the things that Goldman -- fought for was -- to make sure it wasn't hit.
With what's known as a ten B five -- the highest level of fraud charge there is why is that Goldman Sachs felt it would have been really.
Negative impact on its business -- -- with sex is a big back.
And they fought like hell didn't get that can be chart -- five charge out they didn't settle on a ten B five charged let's say SEC capital.
Is forced to settle on a ten B five -- that's where the SEC will not budge it taken to court -- -- now build on that.
What does that mean for the future of SEC capital.
I think that would increase the likelihood.
That the public investors in -- right -- demand redemption we would have a mini run on the bank because that's a kind of statement ties in charge.
And it could produce not only the ten -- card charge and -- higher penalty but.
Possible revocation of your license they are broker dealer you could lose your license and that would mean you couldn't handle your own -- -- to go to -- different broker dealer.
For trades at that point.
Basically mr.
Cohen could become a private traitor but I don't think you'd be able to run -- hedge fund.
Right and it seems like that would be the end of SEC capital if there was -- I've charge up.
The question is is that where they're going with this this and some of this is put on your your -- look at your crystal ball put on your -- and try to do -- Maryland and try to figure this out.
Armed it looks like they're having a difficult time drawing the line.
Completely take him to Steve -- -- is a culprit in these trades they don't quite have that.
A -- I would assume the civil us criminal fraud share charge do they go for the lower hanging fruit which is let's just close this guy down.
My view is -- Mr.
mark -- is the indispensable.
Witness that's matter you know some of the latest part of portfolio manager of former SEC portfolio manager charged.
In this in Saudi trend it's a subject of a criminal complaint and it's a virtual certainty.
That he will be indicted but he is a means to the end he's the only person who could link the knowledge that came from doctor Gilman.
Live.
Mister Callan and Saturday that he knew it came from a breach of fiduciary duty he knew there was cheated.
The misappropriation going all -- -- So far a number of people -- SAC over the last several years have been criminally prosecuted and some of pled guilty.
But no one has been able to link -- -- mr.
Cohen he's kept himself.
Well insulated from his traders right this is the one occasion and which the government thinks they can get very well.
Yet because in their in their complained as you know they said that met Matthew Mattel might actually gave the information that was inside information to mr.
-- not labeling it necessarily as -- we don't know that yet.
That's that that's the blank with the but I'm asking different questions.
Let's just say they -- more -- does not turn up as a witness.
Is the end game is listen we know this difficult a car culture that has no compliance we -- -- shut shut them down and here's how we're gonna do we're gonna say that.
The control person doesn't know what they're doing this is -- like -- this is a hedge fund that's out of control.
Well I think these simpler road is not going after mr.
-- by the SEC but revoking the brokerage license that's facing capital.
If a broker doesn't have internal compliant to consider -- not fit to be a broker dealer and at that point you probably would -- the other investors to withdraw their capital.
Okay will they go that seems to look -- what the end game seems to be the enemy is well thank you John appreciate --
