Exclusive: Watch Billionaire Steven Cohen Stumble Over Insider Trading Rules
In a never-before-published video, hedge fund titan Steven A. Cohen, whose firm this week agreed to plead guilty to securities fraud, describes federal securities laws as “vague,” and asks for an explanation of the basic Securities and Exchange Commission rule that prohibits insider trading.
Under questioning in a video deposition obtained exclusively by FRONTLINE, Cohen is asked whether he is familiar with Rule 10b5-1.
On Monday, SAC Capital, the firm that bears Cohen’s initials, agreed to pay $1.2 billion in fines and plead guilty to what prosecutors described as insider trading “on a scale without any known precedent in the history of hedge funds.”
Cohen, who was not charged personally by federal prosecutors, is facing charges in a separate S.E.C. investigation alleging he failed to supervise his employees and prevent misconduct under his watch.
In the video deposition, which was taken as part of a 2011 civil suit, Cohen describes his firm’s trading rules as “general guidelines” and says that he gives his traders latitude to use their judgment when making deals.
This excerpt begins with attorney Michael Bowe reading a portion of SAC Capital’s compliance manual to Cohen.
The video offers a rare glimpse of the secretive billionaire investor at the center of the biggest insider trading prosecution in U.S. history talking about the very issues that have put him and his firm under such intense scrutiny.
The two-day deposition got testy at times. At one point, a combative Cohen insists that he takes the issue of insider trading “very seriously,” but then admits that he doesn’t remember if he’s read Rule 10b5-1. “I rely on my counsel,” he says.
Cohen is also asked by Bowe whether he would be comfortable trading on a tip from a reporter about an imminent negative news story. As you can see, he struggles with his answer.
The deposition was part of a civil lawsuit by Canadian insurer Fairfax Financial Holdings, which claimed that SAC Capital had conspired with other hedge funds to spread false information in an attempt to drive down Fairfax’s stock price. A judge later dismissed the suit, but that decision is currently under appeal.
The transcripts of the deposition have been previously published by Bloomberg and Reuters.
In order to foster a civil and literate discussion that respects all participants, FRONTLINE has the following guidelines for commentary. By submitting comments here, you are consenting to these rules:
Readers' comments that include profanity, obscenity, personal attacks, harassment, or are defamatory, sexist, racist, violate a third party's right to privacy, or are otherwise inappropriate, will be removed. Entries that are unsigned or are "signed" by someone other than the actual author will be removed. We reserve the right to not post comments that are more than 400 words. We will take steps to block users who repeatedly violate our commenting rules, terms of use, or privacy policies. You are fully responsible for your comments.
More Stories
Mass Shootings, a Supreme Court Ruling, Bipartisan Legislation: How America Reached This Moment on Guns
The Supreme Court Has Overturned 'Roe v. Wade.' These Documentaries Show How We Got Here.
Why the Black Educator Forced Out Over Bogus Critical Race Theory Claims Wanted to Share Her Story
White Parents Rallied to Chase a Black Educator Out of Town. Then, They Followed Her to the Next One.
STREAM NOW
War on the EPA
Get Our Newsletter
Follow Frontline