Cohen indemnifies investors against enforcement losses
Limited partners in SAC Capital funds are more than right to worry about the possible fallout from the insider trading scandal that has engulfed former SAC Capital analyst Mathew Martoma.
The company has already addressed a key issue. Reuters reports that SAC Capital has indemnified limited partners in funds against any losses that might result from enforcement actions. In the Martoma case, securities regulators, in charging former SAC Capital employee, are also seeking to force the SAC Capital division where he worked to disgorge the $276 million in allegedly illicit trades.
Even before the Martoma charges were handed down, SAC Capital "changed its legal structure some time ago to make sure that individual investors would not be liable for any legal claims that might arise."
Cohen himself, or his management company, "will have to cover any court-ordered disgorgement of illicit profits. That means Cohen's own capital, which is believed to account for at least half of the $14 billion managed by SAC Capital, is at risk."
This will certainly help in keeping nervous limited partners in the truck, but their patience will not be unlimited. At some point, the investments in SAC Capital may simply prove too difficult to justify.
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