A Defiant Leon Cooperman Calls SEC ‘Abusive’ After Settlement

  • Manager said trial costs would have been much higher than fine
  • Cooperman said his fund’s gains about match the stock market

Why Leon Cooperman Settled With the SEC

Billionaire hedge fund manager Leon Cooperman lambasted regulators as “abusive” after he settled his insider trading case with the U.S. Securities and Exchange Commission earlier this month.

Leon Cooperman

Photographer: Christopher Goodney/Bloomberg

The founder of Omega Advisors told CNBC Tuesday that he would have won had the case gone to trial, but that he was advised to settle because the trial would have cost him $15 to $20 million and last two to three years. Instead, he agreed to pay a $4.9 million fine.

"My lawyers told me the probability of my winning would be overwhelmingly high," Cooperman said. "The process in my opinion was totally abusive and this is a problem that the government should address."

Cooperman said he turned down a first settlement offer, which would have forced him to pay a $9 million fine and agree to a five-year ban from the securities industry. He said he reconsidered his unwillingness to accept a settlement offer many months later, when the SEC -- now under the control of President Donald Trump appointee Jay Clayton -- offered a new deal: a smaller fine, no admission of wrongdoing and no impact on his ability to keep running his hedge fund.

Cooperman wished Clayton well on his new appointment as SEC chief.

The hedge fund manager said the performance of Omega’s hedge funds has roughly matched the returns of the broader stock market this year. The S&P 500 Total Return Index, a measure which includes reinvested dividends, rose 8.8 percent through May 26. With internal capital comprising between 55 to 60 percent of the money invested in Omega, Cooperman said his firm now operates as "a glorified family office."

He said the stock market is running "somewhat ahead of the fundamentals" and should finish the year higher since the conditions that would spur a market decline don’t exist. Cooperman has been adding to his energy investments and would buy Alphabet Inc., Facebook Inc. and Microsoft Corp. at their current prices.

He also said he wouldn’t own bonds as they are "very fully valued," adding that any bubble in the markets would be in fixed income.

The Omega founder said that he was surprised and disappointed by investors’ reaction to the SEC investigation, and blamed the inquiry as one of the reasons his firm has seen billions in outflows since early 2015. He said the investigation impacted his business "dramatically, way out of proportion to what’s reasonable."

"I’m not a whiner. I’m not a complainer. Life is going to go on," he said.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE