Hedge fund Omega Advisors ("Omega") and firm manager Leon G. Cooperman agreed to settle insider trading charges and beneficial ownership reporting violations. The SEC Complaint, filed in September 2016, alleged that Mr. Cooperman and Omega used material nonpublic information about a publicly traded company ("Company") to make illegal trades.
The SEC alleged that a Company executive informed Mr. Cooperman about an impending transaction that would allow the Company to eliminate a significant amount of secured debt, reinstate cash distributions to shareholders, and participate in a gathering venture. After learning about the forthcoming transaction, Mr. Cooperman reportedly instructed an Omega employee to make trades for several weeks before the information he received would become public.
Additionally, the SEC alleged that Mr. Cooperman violated, at least 40 times, beneficial ownership provisions requiring disclosures about holdings and transactions when ownership of equity securities of a publicly traded company exceeded five or ten percent thresholds.
The SEC charged Mr. Cooperman with violations of Exchange Act Sections 10(b), 13(d) and 16(a), and Rules 10b-5, 13d-1, 13d-2, and 16a-3. As a result of the settlement, Mr. Cooperman and Omega agreed to pay nearly $5 million in interest, disgorgement, and penalties, and subject themselves to outside monitoring by an independent compliance consultant.
Commnetary / Steven Lofchie
The Exchange Act violations, with regard to trade and position reporting, did not result from the use of financial derivatives or hedging strategies. Mr. Cooperman allegedly failed to properly aggregate related holdings and to report positions within the required time frame.
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