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SAC Capital Faces Biotech Insider Trading Inquiry, WSJ Reports

SAC Capital Founder Steven Cohen
Steven A. Cohen, founder and chief executive officer of SAC Capital Advisors LP. Photographer: Ronda Churchill/Bloomberg

SAC Capital Advisors LP, a U.S. hedge fund firm run by Steven Cohen, is the focus of an insider-trading inquiry by the Securities and Exchange Commission, the Wall Street Journal reported, citing unidentified people familiar with the matter.

The U.S. regulator is looking into whether traders used inside information to profit from the $15 billion takeover of MedImmune Inc., a biotechnology company, by AstraZeneca Plc in 2007, the newspaper said. No allegation of wrongdoing by SAC or Cohen has been made. A SAC Capital spokesman said the firm responds fully to all regulatory inquiries and an SEC spokesman declined to comment, the report said.

SAC Capital, which has about $13 billion under management, has come under scrutiny, as part of the U.S. crackdown on illegal stock-tipping at hedge funds, banks and technology companies. The U.S. prosecutors are investigating accounts at the Stamford, Connecticut-based hedge fund tied to Noah Freeman and Donald Longueuil, former SAC Capital portfolio managers who pleaded guilty to federal insider-trading allegations.

Billionaire founder Cohen has said his firm takes compliance “very seriously.”

SAC Capital officials have met with investigators from Senator Charles Grassley’s staff in his examination of the SEC’s oversight of the hedge-fund firm’s trading practices.

“My staff basically just listened,” Grassley, the top Republican on the Judiciary Committee, said in an interview with Bloomberg Television on May 26. The lawmaker said his central focus is on the regulator, not the firm. “What we’re trying to do is get information from the SEC on whether or not the SEC is doing its job.”

Handling the Allegations

In a letter last month, Grassley asked SEC Chairman Mary Schapiro to explain how the regulator has handled allegations of suspicious trading at SAC Capital, referring to about 20 examples he received from the Financial Industry Regulatory Authority of possible insider trading involving the firm.

Cohen started SAC Capital in 1992 with 12 people and about $25 million after leaving brokerage Gruntal & Co., where he worked his entire career. His track record at SAC Capital, a 30 percent average annual return for 18 years, is one of the best in the hedge-fund industry. The firm suffered one annual loss since it was founded: a 19 percent drop for its flagship SAC Capital International Ltd. fund in 2008.

Jay Luo, Hong Kong-based managing director at SAC Capital, didn’t immediately respond to a voicemail left at his office, while Jonathan Gasthalter, an outside spokesman for the firm in New York, didn’t respond to a voicemail after office hours.

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