There are some basic certainties in life. Death. Taxes. The fact that "haters gonna hate." And to this list I think we can add that Sen. Elizabeth Warren will be "disappointed" in the SEC.
As you may recall, Sen. Warren was triply disappointed in the SEC back in June 2015, and expressed that sentiment in a 13-page letter to SEC Chair Mary Jo White. This week, Sen. Warren is back at it again with the "letters of disappointment," having penned a three-page letter today to Chair White related to SAC Capital founder Steve Cohen's ownership interest in a new hedge fund, Stamford Harbor Capital.
"I am writing today to express my concern and disappointment with the Securities and Exchange Commission's recent decision to approve the application of Stamford Harbor Capital, L.P., to register as a money manager for outside clients," Sen. Warren wrote today. She added that the SEC's approval of Stamford Harbor made "a mockery of the SEC's core mission to 'protect investors.'"
To recap, in January 2016 the SEC and Cohen reached a settlement in which Cohen was prohibited from supervising funds that manage outside money until 2018. The SEC alleged that Cohen failed to supervise a former portfolio manager who engaged in insider trading while employed at his firm. The settlement agreement, however, did not place any restrictions on Cohen's ownership of a hedge fund such as Stamford Harbor and, in fact, specifically stated that
Nothing in this Order shall be read to preclude or inhibit any Cohen Entity from applying to register as an investment adviser under the Advisers Act, provided that Cohen shall not be associated with such adviser in a supervisory capacity until December 31, 2017...
Stamford Harbor application to register as an investment adviser became effective March 14, 2016, Bloomberg reports. As noted in Sen. Warren's letter, the regulatory filings clearly state that Steven Cohen "is associated with Stamford Harbor by way of his indirect ownership" of the firm, which will retain up to 50 percent of its clients' profits.
In short, Sen. Warren does not like the terms of the SEC's settlement with Cohen at all because, in her words, they permit a "recidivist hedge fund manager" to
once again profit from -- and potentially exploit -- investors. This is an unacceptable outcome from the nation's primary enforcer of securities laws, and it is the latest example of an SEC action that fails to appropriately punish guilty parties, deter future wrongdoing, and protect investors.
Sen. Warren also asked Chair White to have her staff prepare a briefing on the decision to approve Stamford Harbor's registration, as well as a complete list of "other individuals or firms who, like Mr. Cohen, were barred from managing funds (or barred from other activities by SEC) yet are presently indirectly involved in those activities with SEC registered entities."