(Refiles Oct. 9 story to add attribution in penultimate paragraph)
By Emily Flitter
NEW YORK, Oct 9 (Reuters) - The U.S. Securities and Exchange Commission on Thursday asked a judge for more time to decide whether money from a $602 million settlement with SAC Capital Advisors should go to investors claiming they are victims of SAC’s insider trading scheme.
The decision is being closely watched because of the size of the settlement, as well as the significance of a ruling by the SEC on whether victims can indeed be identified in insider trading cases.
The SEC was set to decide this week whether it would recommend distributing the settlement money, but instead asked for more time to review material it had received from “interested parties.” In its letter to U.S. District Judge Victor Marrero, the Commission said it had received more than 40 written submissions, including letters from investors in the stocks in which SAC made its illegal trades.
A division of SAC Capital agreed to pay the $602 million in March 2013 to settle the SEC’s civil case against it after a former portfolio manager was caught trading shares of two drug stocks in July 2008 based on secret tips. Investors who held those stocks at that time filed a class action lawsuit against SAC seeking around $2 billion. They are also among the people seeking some of the SEC’s settlement money.
“Our clients were on the opposite side of SAC’s trades and we trust the SEC will ultimately decide to create a Fair Fund here, as it has done in other prominent insider trading cases,” said their lawyer, Ethan Wohl.
Representatives for the SEC did not immediately respond to requests for comment.
Criminal sentencing guidelines for securities fraud say insider trading victims are nearly impossible to identify, and some have argued it is a victimless crime. But over the past decade the SEC has distributed $100 million in settlement money to people identified as victims in 15 insider trading cases, according to a study by Urska Velikonja, an assistant professor at Emory University School of Law.
The SEC must now decide by Oct. 30 whether to set up a fair fund in the SAC case. (Reporting by Emily Flitter; Editing by Richard Chang)