When the Securities and Exchange Commission charged Omega Advisors and its founder, Leon Cooperman, with illegally trading on insider information and other securities violations, it seemed as if one possible reason he did not want to settle with the regulator was that he did not want to agree to a ban from the securities business. Sure enough, on Thursday Bloomberg confirmed this notion, reporting that the regulator was originally seeking an $8 million fine and some sort of suspension, citing people familiar with the case.
Cooperman, who is fiercely protective of his reputation, turned this offer down. Cooperman has already publicly said the fine sought by the SEC was miniscule compared with the amount he regularly gives to charity and told CNBC yesterday that “I’m not going to let them basically unfairly destroy my legacy.” Meanwhile, Cooperman recently disclosed that his New York-based firm’s assets under management are now down to about $4 billion, down from the $5.4 billion the firm reported on its website through the end of August. The firm said at that time that “a significant amount” of its total assets consists of “personal general partner capital.”
___
Hedge fund firm Artis Capital Management and a senior research analyst agreed to settle Securities and Exchange Commission charges that the San Francisco firm failed to maintain adequate policies and procedures to prevent individuals from engaging in insider trading. The case is related to an earlier rash of insider trading charges brought by the SEC as part of its investigation into expert networks and trading at hedge funds.
The SEC alleges Michael Harden “failed to respond appropriately to red flags” raised by the misconduct of the employee he was supervising, Matthew Teeple. Teeple and his trading source David Riley were earlier charged by the SEC and sentenced to prison terms stemming from criminal charges. Under its settlement, Artis agreed to disgorge the nearly $5.2 million in illegal trading profits generated by Teeple, as well as more than $1.1 million in interest and a nearly $2.6 million penalty. Harden agreed to pay a $130,000 penalty and is suspended from the securities industry for 12 months.
“Hedge fund advisory firms and supervisors must take all reasonable measures necessary to prevent insider trading, yet Artis Capital and Harden failed to take any action at all in response to Teeple’s highly profitable and suspiciously-timed trading recommendations,” said Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office, in a statement. Artis and Harden agreed to the SEC’s order without admitting or denying the findings.
Artis was created in 2001 and had been registered with the SEC from January 18, 2006 until it withdrew its registration on April 27, 2016. When the firm allegedly engaged in the illegal conduct, it was managing $1.8 billion. However, this sum had shrunk to a mere $13 million as of March 2016, and the firm is in the process of shuttering its hedge funds.
As we earlier reported, back in May 2014 Teeple pleaded guilty to a charge of criminal conspiracy to commit securities fraud after receiving confidential information from Riley, a former chief information officer at Foundry Networks, including information related to the company’s $3 billion acquisition by Brocade Communications Systems in 2008, according to the government. Teeple then passed this information to John Johnson, the former chief investment officer of the Wyoming Retirement System, who traded on it. Johnson had pleaded guilty in 2013 to one count each of securities fraud and conspiracy. Teeple was sentenced to five years in prison. Riley, who pleaded not guilty, elected to go to trial, where he was found guilty. He was sentenced to 6.5 years in prison.
___
Edward Lampert bought nearly 250,000 shares of Lands’ End for a little less than $15 per share between October 3 and October 12. Altogether, his hedge fund firm, Bay Harbor Islands, Florida-based ESL Investments, controls a little more than 19 million shares of the Sears Holdings clothing spinoff, of which 12 million shares are held by Lampert.
___
Point72 Ventures, a venture capital arm created earlier this year by Steven Cohen’s Stamford, Connecticut-based family office, Point72 Asset Management, is one of several investors to participate in the $30 million funding round for Cloud9 Technologies, a cloud-based communication provider for financial firms and institutional traders. “We are thrilled to welcome Point72 Ventures and our other investors as we continue to build a technology that acts as a catalyst in terms of changing the communication and process around trading,” said Gerald Starr, CEO of Cloud9, in a press release.
___
Two Sigma Ventures, a division of New York-based, computer-driven hedge fund firm Two Sigma, participated in the $130 million Series B funding round for Zymergen, which describes itself as “a technology company that makes it economically better to create products made from biology.”
___
Credit Suisse cut its price target on hedge fund favorite Humana from $188 to $175 after the company lowered its earnings estimates. At the end of the second quarter, at least 81 hedge funds held a position in the hospital management giant, according to Goldman Sachs.
