The U.S. Justice Department is set to announce a plea deal with hedge fund giant SAC Capital Advisors that will see the firm pay a US$1.8 billion penalty to resolve illegal insider trading allegations.
The U.S. attorney for the Southern District of New York has reached a plea agreement with SAC, under which the firm agrees to pay a US$900 million fine and to forfeit an additional US$900 million for an aggregate financial penalty of US$1.8 billion (although the US$616 million that it has already to pay the U.S. Securities and Exchange Commission (SEC) counts against the total). It is also required to terminate its investment advisory business, closing its funds to new investors. The deal is subject to judicial approval.
In a letter outlining the terms of the plea, the government indicates that the penalty is the largest ever for an insider trading case. It also notes that the firms will be required to adopt compliance procedures to prevent insider trading. The deal does not provide for any individual immunity.
The government says that it believes the penalties agreed in the case are “steep, but fair”, and that they are commensurate with the alleged criminal conduct. The firm was facing one count of wire fraud and four securities fraud charges, after a grand jury indictment was handed down in July, alleging that SAC is criminally responsible for “insider trading offenses committed by numerous employees and made possible by institutional practices that encouraged the widespread solicitation and use of illegal inside information.”
“Unlawful conduct by individual employees and an institutional indifference to that unlawful conduct resulted in insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry,” the indictment claimed.