Stevie Cohen is close to pleading guilty of insider trading, according to an online report in The New York Times.
Mr. Cohen is famous on Wall Street for the highest returns, highest fees and for paying the highest commissions to his brokers.
Investing 101 on Wall Street is set-up to reward people with money if they can match up an informed point of view with financial assets that are freely bought and sold. This incentive is designed intentionally to motivate the best disclosure of the best information in order to best allocate capital in the most value-creating and productive resources.
Stevie Cohen apparently went too far and was too good at motivating teams of people to help him get that information. What he did was in alignment with the system, but simply taken to its extreme. He was just better than most at the game being played.
The government regulators, on the other hand, have assumed the role of enforcer on people like Stevie Cohen. They draw the line on what is considered “inside information.” If you are caught crossing their line, they penalize you.
In Stevie Cohen’s case, the penalty would reportedly be continued exposure to FBI and SEC actions and a mandate that he only manage his own money. He must return all outside money to his investors.
This is would leave him with a paltry $8 billion of his own family assets with which he could continue to trade.
This confused me. Is the penalty for admission of insider trading that the guilty party can only use their own money to do the same thing in the future?