The SEC will attempt to distribute the funds from its $602 million insider trading settlement with SAC Capital to the people who were on the other (losing) side of those trades, Reuters reports. Ethan Wohl, lead attorney for the group of investors who allege they were the victims of these trades, told Reuters that "our clients are very gratified by the SEC's decision." Wohl's clients have also have filed a $2 billion class action lawsuit against SAC seeking to recover their losses.

As I discussed here last month, it is unusual for the SEC to create a "Fair Fund" under Sarbanes-Oxley to distribute funds to harmed investors in insider trading cases. A recent study showed that of the 236 Fair Funds created between 2002 and 2013, just 15 (6%) were in insider trading cases. In addition, the $100 million returned to investors in those 15 Fair Funds represented only 0.7% of the total funds distributed via SEC Fair Funds during that period.

U.S. District Judge Victor Marrero, who is overseeing the settlement, previously instructed the SEC to notify potential victims about the fund by October 30, 2014, and to advise the court on how the money will be disbursed by November 14. Judge Victor Marrero must now approve the SEC's recommendation and a plan for distributing the funds.

Topics