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SEC Charges Hedge-Fund Tycoon Steven Cohen With Failure To Supervise Traders

Publication Date: 
July 20, 2013
Source: 
The Washington Post News Service
Author: 
Dina ElBoghdady

Professor Joseph A. Grundfest spoke with Dina ElBoghdady of The Washington Post about the SEC's charge against Steven A. Cohen and why he considers their complaint to be weak.

The Securities and Exchange Commission on Friday charged hedge-fund tycoon Steven A. Cohen with ignoring "red flags" that two of his employees engaged in insider trading, a case that could all but end the career of the hedge-fund industry's godfather.

Cohen represents one of the most prominent targets the SEC has ever pursued. A successful outcome would be a major prize in the government’s high-stakes campaign to snuff out illegal trading, sending ripples throughout the hedge-fund world, which has gained financial clout over the past two decades partially because of the eye-popping returns Cohen generated.

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"I've read the complaint carefully, and I think it’s hard to think of a weaker complaint against Steven Cohen as an individual," said Joseph Grundfest, a former SEC commissioner and a securities law expert. "There's no allegation that he himself violated any law. Instead, the allegation is that he didn't properly supervise other people where he reasonably should have known that they were violating the law."