What do you do when your reputation has been so dragged through the mud that you fear the world might not do business with you again? You change your name!
At least, that seems to be Steven A. Cohen’s choice. Cohen has decided to change the name of his much-maligned hedge fund from SAC Capital (representing the initials of its founder), to Point72 Asset Management, reflecting the address of the fund’s headquarters at 72 Cummings Point Road, according to a New York Times report.
At least eight former SAC money managers have been convicted of or pleaded guilty to numerous insider-trading violations, and the firm itself has shelled out $1.2 billion in penalties, and was the first major Wall Street entity in history to admit to criminal conduct. (Previously, accused firms settled without admitting guilt).
Indeed, not content with one new name, SAC is adopting a whole bunch of them, according to an internal memo announcing the changes, obtained by Quartz:
We have selected strong new names that reflect our heritage or signal something important about our businesses. Effective next month, our new entities will begin operating under these new names. SAC will give way to a new flagship name for the parent holding company, Point72 Asset Management, where our management and back office employees will primarily reside. Our two new long/short trading divisions will do business as Point72 Asset Management (Point72) and EverPoint Asset Management (EverPoint). Our MultiQuant business will operate as Cubist Systematic Strategies (Cubist).
Although Cohen himself hasn’t been prosecuted, he hasn’t escaped scrutiny. The Securities and Exchange Commission (SEC) leveled civil charges against him for not supervising his insider-trading-prone employees, and also tried, not entirely successfully, to bar him from the industry.
In the face of all of that, perhaps a name change is apropos. For some beleaguered firms, it has worked pretty well. Here are a few that changed their names after being ensnared in reputation-marring problems:
Compared with these others, SAC’s name change may seem to have little use, since as part of its deal with the SEC, the firm agreed to stop managing outside client money; it will now oversee only the roughly $11 billion of Cohen’s personal wealth.
But one lawyer Quartz spoke with said he believed the name change is largely about “perception” and perhaps Cohen’s own ego. ”SAC has become synonymous with insider trading and this change is about distancing the firm from the past,” said white-collar attorney and St. John’s University law professor Anthony Sabino. Though it won’t manage outside money, notes Sabino, the firm and its 850 employees will still have to interact with other financial institutions. “They’ve just switched the name in an attempt to bury the past,” he said. Nor is it likely, said Sabino, that the firm will be able to take outside money at some point in the future, given the SEC’s original order.
However, some reports have suggested that Cohen might yet face insider-trading charges some day, which would hurt what’s left of the firm’s reputation. A name change now may allow it to put some distance between itself and its founder. It may be noteworthy that the letter about the name changes came not from Cohen himself, but from SAC president Tom Conheeney. “We have been through a great deal during the past few years. Our new names, combined with the other changes we have announced, are intended to help us to move forward,” he wrote.
