An insider-trading probe involving the U.S. House Ways and Means Committee and a top staff member also includes dozens of hedge funds, investment advisors and other firms, the U.S. Securities and Exchange Commission said in a court filing.
In arguing against the House’s motion to dismiss the case or send it to a court in Washington, the SEC told a Manhattan federal judge July 16 that the geographic scope of its investigation is “much wider” than described by lawyers for the House and involves a total of 44 entities.
The probe concerns some of the largest hedge funds and asset-management advisers in the U.S., the SEC said. Twenty-five of the 44 are based in New York, it said.
The agency subpoenaed the House committee and the staff member, Brian Sutter, for its inquiry into whether non-public information was illegally passed about a change in health-care policy that resulted in a spike in share prices of insurance companies. The case is testing whether U.S. insider-trading laws allow regulators to investigate the committee or its staff.
According to the regulators, minutes before the government announced the policy change, an analyst at Height Securities LLC sent clients a flash report outlining the proposal. Sutter may have been a source used by a lobbyist at Greenberg Traurig LLP who disclosed the health policy changes to the Height Securities analyst, the SEC said.
The government announced an increase, rather than decrease, in payments to health insurers, boosting the shares of companies including Humana Inc.
“The Humana investigation is substantially concerned with the investor clients of Height Securities who received the subject Height e-mail, and who the commission believes may have engaged in relevant trading,” the SEC said in a filing to U.S. District Judge Paul Gardephe. It didn’t name the investors.