It’s safe to say that the besieged hedge fund SAC Capital has lots more to worry about than a class action by investors in Elan Corporation, one of the companies whose shares the fund supposedly traded on the basis of inside information. The New York Times and The Wall Street Journal reported Wednesday that federal prosecutors in New York are on the verge of indicting SAC, the culmination of an insider trading investigation in which four onetime fund employees have pleaded guilty and two more, including the star portfolio manager Michael Steinberg, are facing criminal charges. SAC founder Steven Cohen is busy defending against Securities and Exchange Commission allegations that could knock him out of the industry, and SAC outside investors have pulled $5 billion out of the fund. Amid those woes, a ruling Tuesday by U.S. Magistrate Kevin Fox of Manhattan – granting Elan investors early access to materials the SEC and the Justice Department have turned over to former SAC portfolio manager Mathew Martoma – is the equivalent of a flea bite. But for the securities class action bar, Fox’s order is big news: It’s a very rare instance of a judge permitting shareholders to obtain discovery before they’ve survived a defense dismissal motion. More on Reuters here.
