Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading

Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading

Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading

Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Categorized | Financial

SEC cloud hangs over Cooperman’s APL trades


Posted on September 22, 2016

Leon Cooperman, chairman and chief executive officer of Omega Advisors Inc., speaks during a Bloomberg Television interview in New York, U.S., on Tuesday, Oct. 13, 2015. Cooperman said the U.S. Securities and Exchange Commission needs to address market structure problems caused by super-fast computers. Photographer: Chris Goodney/Bloomberg©Bloomberg

Leon Cooperman

It may have been past eight in the evening but Leon Cooperman could not wait to share the good news with his family. The veteran hedge fund manager had just finished a call with a senior executive at Atlas Pipeline Partners (APL), an energy company he held in his portfolio, learning that the company had just sealed a deal to sell off one of its biggest assets. “Good news on APL,” Mr Cooperman wrote to his unnamed relative in July 2010, according to a complaint from US regulators.

Mr Cooperman’s relative, however, was less enthused. After being informed by a colleague that the information explained some recent “fishy” activity in APL call options, the family member replied: “Somebody should investigate that.” Unfortunately for Mr Cooperman, a 73-year-old who has spent almost five decades trading on Wall Street, the Securities and Exchange Commission agreed.

    Mr Cooperman, who is accused of making “significant illegal profits” by the SEC with his trades in APL, was previously known for being one of the longest-standing hedge fund managers on Wall Street, having set up Omega Advisors in 1991. Now the Bronx-born son of a plumber has found himself at the centre of the highest-profile SEC probe into insider trading since the prosecution of Steven Cohen’s SAC Capital.

    The SEC’s insider trading allegations against Mr Cooperman follow a series of investigations into the close relationships that certain hedge funds enjoy with company management and the privileged information they can glean from them.

    “If the SEC has their facts right, it’s an easy one — it’s a headshot,” said David Chase, a lawyer and former SEC prosecutor. Mr Cooperman “should know better. He’s a big boy, he’s sophisticated, he knows how things work,” Mr Chase added.

    Mr Cooperman is accused by the SEC of breaking a promise to an unnamed APL executive not to trade on information that was provided about the forthcoming sale of its Elk City asset, helping him realise $4m in profits from the trade.

    A potentially more serious aspect to the insider trading probe, however, is the SEC’s allegation that Mr Cooperman attempted to cover up the information exchange.

    The SEC claims that when Omega received a subpoena, Mr Cooperman “contacted the executive and tried to fabricate a story to tell if questioned”. The executive was “shocked and angered” to learn that Mr Cooperman had traded ahead of the sale announcement, according to the complaint. Mr Cooperman says the SEC’s claim that he tried to fabricate a story around the trading was absolutely false, according to the person familiar with the matter.

    SEC v Leon Cooperman and Omega Advisors complaint

    “In breach of a duty of trust or confidence, Cooperman and Omega knowingly or recklessly traded APL securities”

    The alleged cover-up is “a big, big danger”, said Mr Chase.

    “The co-ordination of stories — that’s what Martha Stewart went to jail for, not for insider trading but for lying and obstructing justice for it,” he said. “The cover-up in many instances is worse in terms of penalties, and it could take what is otherwise a purely civil SEC insider trading case to the criminal realm.”

    By 2009 Mr Cooperman had established a 9 per cent stake in APL worth about $46m, and had begun to build relationships with the company’s executives, enjoying a level of access according to the SEC “that was not available to [Atlas’s] smaller shareholders”. But Mr Cooperman had become frustrated by the company’s poor performance and by the first half of 2010 he began to sell down his APL shares.

    On July 7 2010, he complained to a consultant working for his hedge fund that Atlas was a “shitty business”. Later that same day a phone call with an unnamed senior APL executive appeared to change Mr Cooperman’s mind. He began to buy up large amounts of APL call options, accounting for 90 per cent of the volume traded that day, building his position in the company over the following days.

    On July 28 the “good news” Mr Cooperman had shared with his relative became public — APL had sold its Elk City asset for $682m and its shares jumped 31 per cent.

    Hedge funds: Overpriced, underperforming

    hedge funds

    The industry has ballooned thanks to pension funds. Now institutional investors are taking a look at costs and returns

    For his part, Mr Cooperman appears incensed by the SEC’s accusations which followed a lengthy investigation. He and his Omega hedge fund could have settled with the regulator but he refused because he believes he and the fund acted appropriately, according to a person familiar with the situation.

    Since the SEC first made contact with Mr Cooperman, he has launched a staunch defence of his conduct, calling the investigation a “seriously misguided effort”.

    Central to his defence is that the trading in July of 2010 came three years after Omega first invested in APL, and that the size of the trades were insignificant relative to the size of Omega’s position and its overall assets.

    Mr Cooperman argues that because Omega did not realise any gains on his investment in APL, “it is illogical, and defies common sense, that the SEC would bring an insider trading case based on that trading pattern”.

    “Unfortunately, as sometimes happens in our business, this particular investment turned out to be unsuccessful.”