The Securities and Exchange Commission said that nearly four dozen funds may have traded on insider information coming out of a congressional committee. This could make the SEC’s congressional insider trading probe one of the largest in history.
According to the SEC, as many as 44 funds, “including some of the largest hedge funds and asset managers in the world,” may have traded on insider information coming out of the House Ways and Means Committee. The SEC went to court in mid-June seeking to enforce subpoenas it issued to Congress. The House Ways and Means Committee has argued that it doesn’t need to comply with the subpoenas.
The SEC subpoenaed the House committee and staffer Brian Sutter for its inquiry into whether non-public information about a change in healthcare policy that resulted in a spike in share prices of insurance companies was illegally passed. The government announced an increase, rather than decrease, in payments to health insurers, boosting shares of insurance companies, including Humana Inc (NYSE:HUM).
Proposal was leaked
According to the SEC, minutes before the government announced the policy change, an analyst at Height Securities LLC sent clients a flash report outlining the proposal. The securities regulator said Brian Sutter may have disclosed the health policy changes to the Height Securities analyst, possibly through a lobbyist at Greenberg Traurig LLP.
Arguing in favor of the House and Sutter, their lawyers said in a July 4 filing that staff members are “absolutely immune” from having to comply with subpoenas from a federal regulator in an insider trading probe. However, the SEC cited a law Congress passed in 2012 which stipulates that public officials keep confidential non-public information about government matters that could move stock prices.
In its argument, the SEC said the insider trading probe involved dozens of trading firms, including 25 that were headquartered in New York, while the remaining 19 were located in a number of states. The securities regulator said only one firm was based in Washington, D.C.
Though the SEC didn’t identify individual investment funds, The Wall Street Journal has previously reported that Viking Global Investors LP and the formerly named SAC Capital Advisors LP were among the funds placing bets that day that shares of individual health insurance firms would rise.