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Steve Cohen's Judgement Calls


Parsad
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Reuters was able to petition the court to release Steven Cohen's deposition testimony, and here are some of the comments.  My personal opinion, not unlike what Buffett always says, if you are close to the line, then you probably should think twice.  David Sokol should have thought twice, and it sounds like Cohen also needs to think twice before acting on a trade.  Cheers!

 

http://tinyurl.com/6shxzwb

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"You know, I mean, I can argue that someone else could think that a - being short in front of a sell recommendation is a non-event because it's not going to move the stock, and somebody else would think, you know, that's trading on material nonpublic information regardless if it moves the stock or not," said Cohen. "These are judgment calls."

 

I am no securities expert by any means but I think it is well understood that trading on non-public, material information (like an analyst downgrade) is illegal.  I mean, if that were the case, hedge funds could completely crush the markets just by shorting debt that is going from lowest investment grade to junk.  Am I missing something?

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This reminds me a bit of Regulation FD and the huge rise in hedge funds. Back before Reg FD, hedge funds were around, but not nearly as big as they are now. In the past, mutual funds had advantages but it seems like Reg FD has negated that.  Since they are so much more secretive than mutual funds, things can be leaked much easier than they can at mutual funds. Also, since mutual funds were much, much bigger, I would imagine they probably got the inside information sooner than a lot of hedge funds.  Now, the places that have access to the leaked information (legally gray) are only available to the wealthy. Am I right on this?

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