S.A.C. Capital Advisors tells investors it received Wells notice

S.A.C. Capital Advisors received a Wells notice related to alleged insider trading by a portfolio manager who was arrested last week, according to three people with knowledge of the matter.

The notice from the SEC, an indication that the regulator might sue the recipient, cited fraud and control-person liability over its management of S.A.C. unit CR Intrinsic Investors, according to one of the people.

Steven Cohen, who runs the $14 billion hedge fund, wasn't named in the Wells notice, said the person, who asked not to be named because the information is private.

S.A.C. received the notice last week, Tom Conheeney, the firm's president, told investors on a conference call Wednesday, during which the firm discussed the Nov. 20 arrest of a former S.A.C. portfolio manager, Mathew Martoma, for alleged insider trading while at S.A.C.

Mr. Cohen, who opened the call, said he acted appropriately when he traded shares of drugmakers four years ago on recommendations from Mr. Martoma, according to two of the people. Trades in the shares by Mr. Martoma are at the center of what prosecutors call the biggest insider-trading scheme.

Mr. Cohen hasn't been accused of any wrongdoing. Mr. Conheeney said the firm will pay any penalties, according to the person.

Jonathan Gasthalter, a spokesman for S.A.C., declined to comment.

Prosecutors say S.A.C., one of the best-performing hedge funds, reaped $276 million in profits and averted losses by trading stocks of Elan and Wyeth in 2008 based on inside information Mr. Martoma received, and that Mr. Cohen traded those shares in his own portfolio and discussed the stocks with Mr. Martoma.

Last week's charges mark the sixth time a current or former S.A.C. employee was linked to insider trading while working at S.A.C.

CR Intrinsic, the unit where Mr. Martoma worked at the time, was named last week as a defendant in a civil complaint by the SEC, along with Mr. Martoma and the doctor who allegedly provided the inside information.