Steven Cohen’s Firm to Stop Paying Bonuses for Best Trading Ideas

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Steven A. Cohen turned his hedge fund into a family office.Credit Justin Lane/European Pressphoto Agency

Steven A. Cohen continues to take steps to send a message to federal authorities that his $10 billion family office will not run afoul of the law in the way his former hedge fund did.

Mr. Cohen’s firm is putting an end to its long-standing practice of “tagging” trades as best investment ideas that could generate bigger bonuses. The decision to end the tagging of trades was announced on Thursday in a letter to employees of Mr. Cohen’s new firm, Point72 Asset Management.

The process of tagging a trade as a best investment idea is one of the practices singled out by federal prosecutors in an indictment of Mr. Cohen’s former hedge fund SAC Capital Advisors, which pleaded guilty to insider trading charges nearly a year ago. Federal authorities said the tagging of trades encouraged some traders and analysts at SAC to seek unlawful inside information.

Douglas D. Haynes, the president of Point72, said in the letter to employees that “ending tagging reduces the firm’s regulatory and reputational risks.”

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The sign outside Steven A. Cohen's family office in Stamford, Conn.Credit Suzanne DeChillo/The New York Times

Jonathan Gasthalter, a spokesman for Point 72, declined to comment on the letter.

For much of this year, Mr. Cohen, 58, has sought to shed some of the practices at SAC that led Preet Bharara, the United States attorney for Manhattan, to call the once-mighty hedge fund “a magnet for market cheaters.” Mr. Cohen’s firm is in the process of putting together an outside board of advisers to review its management practices. This summer, it announced it would pay bonuses to employees who reported unethical behavior at the firm. Earlier, Point72 hired a former federal prosecutor to serve as its chief of surveillance and signed a deal with Palantir Technologies, a software company that receives backing from the Central Intelligence Agency, to monitor trading.

The new firm also no longer holds impromptu Sunday morning meetings during which top portfolio managers share some of their best ideas with Mr. Cohen. The Sunday meetings were another hallmark of how SAC had operated.

“We spent the year working to make the changes necessary to be a great family office, adhering at all times to professionalism and the highest ethical standards,” Mr. Haynes wrote in the letter to employees of the firm that has more than 800 people working for it.

It’s not clear exactly why Mr. Cohen is taking these steps because Point72, operating as family office, does not manage outside money from investors. In pleading guilty, Mr. Cohen’s firm was barred from managing outside money. The firm manages about $10 billion of Mr. Cohen’s personal fortune.

Federal prosecutors, after securing guilty pleas and convictions of eight people who once worked at SAC, appear to be done with their criminal investigation. Mr. Cohen was never charged with a crime although federal prosecutors at one point had sought to take grand jury testimony from him.

The billionaire investor still faces a civil proceeding brought by the Securities and Exchange Commission on an allegation of administrative failure to supervise. The S.E.C. action could result in Mr. Cohen being barred from working in the securities industry.

Mr. Cohen’s firm announced the new tagging policy on the same day that Mathew Martoma, a former SAC trader convicted of insider trading, was scheduled to report a federal prison. Mr. Martoma was sentenced in September to nine years in prison after his conviction on charges that he helped SAC avoid losses and generate $275 million in profits during the summer of 2008.