Court: Congressional Staff Not Immune from SEC Insider Trading Probes

Vice President Biden and members of Congress watch as President Obama signs the STOCK Act on April 4, 2012. A year later, Congress moved to undo large portions of the law without fanfare.
Brendan Smialowski/AFP/Getty Images

Consider it a big blow against the insider culture that pervades Washington, D.C.

The U.S. District Court for Southern District of New York rules that congressional staff members cannot seek immunity from insider trading investigations conducted by the Securities and Exchange Commission (SEC).

Specifically: the SEC is looking into allegations that a senior member of the powerful House Ways and Means Committee named Brian Sutter “may have been a source” for information given to a lobbyist at the high powered law firm Greenberg Traurig who in turn passed the information to the investment firm Height Securities LLC.

The information concerned changes in health care policy concerning reimbursing health insurance companies. There had been widespread speculation about which direction the powerful House Committee might go in the matter. The information resulted in a huge spike in health insurance companies’ shares on Wall Street.

Height Securities clearly had advance notice that reimbursements to insurance companies would increase, and alerted traders in advance of a public announcement by the committee. Within five minutes of Height Securities going public, stocks like Humana jumped 7 percent according to the SEC.

Providing stock tips to Wall Street has become a lucrative business in Washington, D.C., in some cases more lucrative than lobbying. Often carried out under the moniker of “political intelligence” it offers political insiders an opportunity jump ahead of the less connected and trade on government information before it becomes public.

The judge’s ruling means that senior congressional staff members will be required to testify in the case. The SEC investigation is one of the first under the Stock Trading on Congressional Knowledge Act (STOCK) passed in 2012 to tackle what is seen as widespread insider trading by political figures in Washington.


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