Tags: Roth | SEC | Stronger | White

Attorney Richard Roth: SEC Adopts Stronger Stance under White

Wednesday, 24 Jul 2013 07:04 PM

By David Nelson and Dan Weil

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The Securities and Exchange Commission has turned more aggressive since Mary Jo White took over as chairman in January, says trial attorney Richard Roth, a leading expert on securities law.

That increased strength was shown in the SEC's civil action against Steven Cohen, CEO of SAC Capital Advisors, last week, Roth tells Newsmax TV in an exclusive interview.

"The SEC has been burned. They are, in fact, embarrassed, and they want to show the investor that they actually are on top of the firms that they regulate," he says.

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"So it is a message to Wall Street: don't engage in this kind of conduct. Whether they're right or wrong, they're going forward."


Cohen's high profile makes him a juicy target for the agency, Roth asserts. "The SEC likes going after the big guy," he says. "If they think they can get a guy like Steven Cohen, [he] would be probably the biggest feather in their caps since the Michael Milken era."

Milken, a king of the junk bond market in the 1980s, pled guilty to securities fraud in 1990 and was fined $600 million.

"The bigger you are, the more they look at you, " Roth says.

As for Cohen, who the SEC charged with failing to supervise employees accused of insider trading, his wealth accounts for about $8 billion of SAC's approximately $10 billion in assets.

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So he could abandon the hedge fund business and simply manage his money as a family office, Roth says.

"We're talking about a few things," he says. "Certainly Steven Cohen doesn’t need money. We're talking about ego. We're talking about reputation."

If Cohen and his lawyers believe the cases against him can be defeated, "then they may fight the fight," Roth says. Still, "there's a point in time where you may just want to shut down and move on. We'll see what his decisions are once this indictment comes down."

Federal prosecutors are preparing to launch criminal charges against SAC Capital for insider trading within days, knowledgeable sources tell The New York Times and The Wall Street Journal.

A successful prosecution would likely shut down SAC as a commercial firm, Roth and others say. "It could very well be the death of the elephant if an indictment comes down," he says.

"We don't know what the federal government is going after" in its likely case, Roth points out. His best guess is that it will involve drug stock trades by former SAC fund manager Matthew Martoma.

"It is very rare that the federal government actually indicts a company like this," Roth points out. The most famous example was accounting firm Arthur Andersen in 2002, which collapsed after government charges.

As for the SEC, its "case may be tough [to prove] because they're claiming that he [Cohen] essentially should have, in his supervisory capacity," seen e-mails of his underlings, Roth said.

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