Reports: SAC Indictment Poses Quandary For Prime Brokers

With the recent indictment of SAC Capital Advisors, questions arise for the service providers of the hedge fund.

Earlier this week, the roughly $15 billion hedge fund was charged with insider trading, with four counts of securities fraud and one count of wire fraud. This has reportedly prompted some prime brokers, such as Deutsche Bank and Citi, to reconsider their relationship and financing arrangements with the hedge fund.

According to an SEC filing, SAC uses multiple other prime brokers as well, including Goldman Sachs, Credit Suisse, Morgan Stanley, BNP Paribas, Bank of America Merrill Lynch, Barclays, J.P. Morgan and UBS.

SAC hopes to continue “business as usual” with its prime brokers, according to a report by Wall Street Journal and released a statement Thursday that it has “been advised by the U.S. attorney’s office that their action is not intended to affect the ongoing operations of SAC’s business, prevent investor redemptions, or impact the interests of any of SAC’s counterparties.”

In the meantime, the government has not ordered an asset freeze, which may calm prime brokers’ fears about exposure, according to WSJ.