Wednesday, May 1, 2013

SEC issues subpoenas to ‘political intelligence’ firms in connection with leaked information

The Securities and Exchange Commission has issued subpoenas to firms and individuals in connection with the leak last month of a federal funding decision that appeared to cause a surge in stock trading of several major health companies.
The move deepens the government’s scrutiny of the emerging “political intelligence” industry, which has been thriving on delivering valuable information from Washington to investors. This relatively new breed of companies capitalizes on the fact that decisions made in Washington — whether a regulator blocking a big merger or a lawmaker tweaking legislation — can create opportunities for stock traders to make money.

The latest case emerged April 1 when Height Securities, a political intelligence firm in the District, alerted its clients that the government would soon make a decision favoring health insurers who participate in the Medicare program.
The alert went out 18 minutes before the end of the trading day, sparking a surge in trading in the shares of several major health firms, including Humana and Aetna. The official government announcement was not made until the next day.
On Wednesday, several people familiar with the probe confirmed the SEC has subpoenaed a Height Securities analyst and Mark Hayes, a health-care lobbyist who advised the firm on legislative issues. Hayes’s law firm, Greenberg Traurig, was also subpoenaed by the SEC, according to the people, who spoke on condition of anonymity because the matter was under federal investigation.
The SEC has conducted an interview with Hayes, who voluntarily submitted to four hours of questioning, these people said. The FBI was present at the meeting, suggesting that the Justice Department has taken a deep interest in the matter, one of the people said.
The SEC declined to comment, but people familiar with the investigation said the agency began issuing subpoenas in mid-April seeking e-mails and other internal documents.
All the parties involved have denied any wrongdoing, their attorneys and company officials said.
Investigators for the SEC and Justice recently have been escalating a crackdown on insider trading, setting their sights on some of the most powerful traders on Wall Street. The Height Securities case opens a new front in this campaign, by going after firms in the agencies’ own back yard in Washington.

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