The US Securities and Exchange Commission is prohibiting Steven Cohen, a hedge fund manager who runs family office firms, from supervising funds that manage 'outside money' until 2018.

The regulator had originally charged him for failing to supervise a former portfolio manager who engaged in insider trading while employed at his firm - an allegation that he has apparently not confirmed or denied from that day to this.

Cohen’s family office firms, moreover, will be subject to SEC inspection and must retain an independent consultant to conduct periodic reviews of their activities to ensure that they are complying with the law. The regulator is hoping to see "legally sufficient policies, procedures and supervision mechanisms in place to detect and deter any insider trading.”

In a court order, the SEC alleges that Cohen failed to supervise former portfolio manager Mathew Martoma, who engaged in insider trading in 2008 while employed at CR Intrinsic Investors, an investment advisory firm that was a wholly-owned subsidiary of SAC Capital Advisors LLC, an entity that Cohen founded and then controlled. Cohen apparently ignored tell-tale signs that Martoma was engaged in insider trading. Because of the trades in question, Cohen’s hedge funds earned profits and avoided losses of approximately $275 million.

Under the terms of the settlement, Cohen is prohibited from serving in a supervisory role at any broker, dealer, or investment adviser until 2018, must retain an independent consultant and adopt consultant recommendations, and must submit to on-site SEC examinations of his registered and/or unregistered firms.

In the order, the SEC reserves the right to extend the length of the settlement terms if it ever has cause to take fresh action against Cohen, entity related to him, or any employee he has been supervising. If Cohen becomes associated in a supervisory capacity with an entity that is a registered broker, dealer, or investment advisor in 2018 or 2019, that entity will have to hire an independent consultant to help it see out the decade.

Some time ago, in November 2012, the SEC charged CR Intrinsic and Martoma with insider trading. In March 2013, CR Intrinsic agreed to pay more than $600 million in order to settle the SEC charges. In July 2013, Cohen’s entities (including SAC Capital Advisors and CR Intrinsic) paid an additional $1.2 billion to offset criminal charges laid against them by the US Attorney’s Office for the Southern District of New York.