Steven A. Cohen, the billionaire investor, is looking to hire a former prosecutor or securities regulator to monitor trading at his investment firm in the wake of the federal government’s insider trading investigation.
Mr. Cohen’s SAC Capital Advisors hedge fund, which pleaded guilty to securities fraud in November, is in the process of converting to a family office that will manage mainly $9 billion of his personal wealth. The firm announced its intention to hire a chief surveillance officer to monitor trading in a letter to employees on Tuesday. The firm expects to fill the newly created position in the spring.
The announcement of the new post comes a few weeks before United States Judge Laura Taylor Swain has said she will decide whether to approve or reject SAC’s guilty plea. The firm also agreed to pay a $1.2 billion penalty to resolve charges arising from the insider trading probe and to stop managing money for outside investors.
The letter to employees also described how SAC, after converting to a family office, would consolidate several operating divisions and would announce a new name for the firm sometime in April. The firm, the letter said, has shrunk from 1,000 employees in early 2013 to about 850 people today. The firm said it finished returning most of the outside money it managed for private investors in January.
Mr. Cohen, 57, is taking steps to show federal prosecutors that he is committed to reforming the way his once $14 billion firm operated. In the letter, Mr. Cohen and SAC president, Tom Conheeney, said they “are committed to doing everything in our power to ensure we never go through again what we have experienced over the last few years.â€
Federal prosecutors labeled SAC a breeding ground for illegal traders when it indicted the firm last summer. Eight employees of SAC have either pleaded guilty to insider trading or been convicted at trial.
The most recent verdict came on Feb. 6 when a federal jury in New York convicted Mathew Martoma, a former SAC portfolio manager, of participating in the most lucrative insider trading scheme on record. The evidence during trial put an uncomfortable spotlight on the SAC owner, after a key government witness testified that an agent with the Federal Bureau of Investigation told him that the primary target of the investigation was Mr. Cohen.
Federal prosecutors have not charged Mr. Cohen with any wrongdoing, but the Securities and Exchange Commission has a pending administrative failure to supervise action against him. Federal authorities continue to investigate SAC, but a person briefed on the matter said the inquiry is winding down and it is unlikely there will be a criminal prosecution of Mr. Cohen. Jonathan Gasthalter, a spokesman for SAC, declined to comment.
A person briefed on the matter said the firm intended to hire either a former federal prosecutor or a securities regulator for the new surveillance monitoring position. The person tapped will report to Mr. Conheeney.
The new surveillance monitor will bolster the firm’s compliance operation. SAC’s longtime chief of compliance, Steve Kessler, is leaving the firm at the end of February.
SAC began shrinking its staff by laying off much of its investor relations and marketing staff and closing its office in London in the fall. A number of traders and analysts also have left the firm for other hedge funds.
In the letter to employees, Mr. Cohen and Mr. Conheeney showed no indication that the new firm intended to fade into Wall Street history. They said the changes SAC is making “will make us a stronger firm as we move forward together.â€
