Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  



SAC Capital's Offense

| No Comments

This afternoon SAC Capital entered a guilty plea in court as part of the largest insider trading settlement ever. In connection with the five criminal counts of wire and securities fraud, SAC Capital agreed to pay approximately $1.2 billion (in addition to a $616 million SEC penalty already paid) and pledged never again to manage anyone else's money. U.S. Attorney Preet Bharara characterized the record-breaking penalty as "steep, but fair." According to Bharara, the penalty is "several orders of magnitude larger than the identified avoided losses and gains made by" SAC and is in excess of the maximum under the sentencing guidelines.

The government's complaint provides a little context for understanding the penalty, but not much. Over approximately a decade, eight SAC employees allegedly traded an unspecified number of times on information about companies that they got from employees at the companies or knowledgeable third parties. SAC allegedly encouraged this behavior, and, as the complaint explained, "the encouragement by [SAC] to pursue aggressively an information 'edge' overwhelmed limited SAC compliance systems." The government has obtained guilty pleas from some of the individual insider traders, but the complaint is a bit slim on specific facts to support a penalty of the size imposed. Some of the cited examples of offending conduct are not particularly incriminatory: for example, an SAC employee spoke with a tech analyst who had spoken to a Microsoft employee who had seen some of his colleagues at Microsoft talking to Yahoo employees, thus foreshadowing a partnership between Yahoo and Microsoft.

As Bharara noted, part of the purpose of the tough settlement with SAC was to act as a deterrent. That purpose would have been more effectively accomplished if the government had provided more details about the specific conduct it was trying to deter.

Leave a comment

Once submitted, the comment will first be reviewed by our editors and is not guaranteed to be published. Point of Law editors reserve the right to edit, delete, move, or mark as spam any and all comments. They also have the right to block access to any one or group from commenting or from the entire blog. A comment which does not add to the conversation, runs of on an inappropriate tangent, or kills the conversation may be edited, moved, or deleted.

The views and opinions of those providing comments are those of the author of the comment alone, and even if allowed onto the site do not reflect the opinions of Point of Law bloggers or the Manhattan Institute for Policy Research or any employee thereof. Comments submitted to Point of Law are the sole responsibility of their authors, and the author will take full responsibility for the comment, including any asserted liability for defamation or any other cause of action, and neither the Manhattan Institute nor its insurance carriers will assume responsibility for the comment merely because the Institute has provided the forum for its posting.

Related Entries:



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.