SAC & Legal Risk

How likely do you think it is that SAC will be accused of insider trading / securities fraud by the SEC, and how high up do you think the accusation would have to be to bring down the firm or cause massive outflows?

Post Raj going down there have been stories about how the gov. will be emboldened to go after more funds. SAC seems to be the name in the news the most that hasn't been actually targeted. There have been some ex SAC employees who were brought down on insider trading, and there was a recent WSJ article about the gov requesting records related to the book that Cohen manages.

I was hoping for your advice about how likely you think it is that SAC could be accused of insider trading. I assume the way this would have to go down is for the gov to accuse some pretty important PMs or very senior people at the firm of insider trading. It seems to me that given the structure of SAC (many different funds acting independently that report to sector heads who then report to Cohen), that Cohen is quite insulated form any sort of insider trading allegations. Even if one of the PMs had an idea that was based on insider info ans Cohen traded on it the gov. still has to prove that Cohen knew the idea was based on insider info. Also, given the length of time since the first since SAC was first subpoenaed and there have been no formal accusations / charges it seems less likely.

My take is the risk is lower than people expected, and I think even if one portfolio manager got accused, it might not take down the whole fund. I also read an article today that SAC has been receiving fund inflows lately and is considering closing to new investors, so the news out there does not seem to be having an impact.

I was hoping you could give me your thoughts on this issue. Thanks.