Yesterday hopefully taught any financial players (especially those in the alternatives business) who believe that they’re invincible a very important lesson: Early reports that the government is slowing down in its aggressive campaign against hedge fund managers is simply not being accurately or appropriately reported by the mainstream mediaÂ (and I’m certainly not making any judgments about whether these or other fund managers actually are culpable here). Nevertheless, it was only weeks ago we were led to believe that both Steven Cohen of SAC Capital Management and Phillip Falcone of Harbinger Capital were essentially getting off with little more than a mere slap on the wrist. Not so fast guys . . .
Admittedly, nobody is being charged with criminality (YET….) in either case. But regulatory aggression certainly seems to be spiking up – and fast. The fact that one set of publicly announced penalties is now quickly being followed with a second stepped-up campaign speaks volumes both about why the least prepared (and most stereotyped) sector of the financial community ought to have serious reason for concern. Just days ago, it appeared both controversies had more-or-less reached conclusions. Now? Not so much . . . Â (With Falcone, the SEC reversed its own settlement, whereas the Harbinger matter seemed to have been fully settled with fines and a temporary ban (still intact) but not the additional possibility of new charges…)Â Sure, all this may just be a series of “adjustments.” That is possible. Is it likely? I say: WATCH AND DECIDE. But PLEASE… If you’re in the industry, do so VERY carefully.
Or (purely as an enjoyable thought exercise) think of all this slightly differently . . . Say somebody shot at you once with a pistol and missed. How much confidence do you have that means they won’t use an assault rifle as a follow-up? Â Maybe a drone strike perhaps? Regardless, before you feel comfortable with whatever your conclusion might be, perhaps at least consider consulting a high-ranking member of theÂ YemeniÂ Taliban . . . Or rather, someone who once knew a high-ranking member of the Yemeni Taliban.
Here’s the current deal with Cohen and Falcone:
Cohen: â€œIf the administrative court determines [Steven] Cohen is liable for failing to properly oversee his employeesâ€™ conduct, he faces a range of penalties, from a fine to a permanent ban from the financial industry.â€
[â€œSEC charges hedge-fund tycoon Steven Cohen with failure to supervise traders,â€ The Washington Post, 7/19/2013]
Falcone: “The Securities and Exchange Commission has rejected an $18 million settlement that would have banned billionaire hedge-fund manager Philip Falcone from the securities industry for two years.”Â
[SEC Rejects $18M Deal With Falcone, Hedge Fund, NPR, 7/19/2013]
Â So — What’s next guys???