Will Congress Redo what it Undid on Political Intelligence Firm Disclosures?


The Washington Post reported today that the SEC is issuing subpoenas to investigate the possibility that a “political intelligence” firm used congressional sources to gather insider information about health care funding, launching a surge of trading in health companies after the nonpublic information was made available to Height Securities, a stock brokerage firm.

Subpoenas, lengthy investigations and anonymous sources are one way to get to the bottom of whether some lucky investors used insider information from Congress to profit from timely stock trades. But here’s another thought. What if Congress enacted disclosure laws to help enforce rules against insider trading? What if political intelligence professionals were somehow required to publicly disclose their clients and the issues they are working on, the same way registered lobbyists have to publicly disclose information about their work? Seems like such disclosures might help cut to the chase, streamlining investigations and maybe even providing a check on the system to prevent the possibility of insider trading on congressional information in the first place. Too bad no one ever thought of that.

Oh wait. Someone did.

The original incarnation of the STOCK Act mandated disclosures by political intelligence professionals, and, in both the House and the Senate, had enough votes to pass. But even a majority in favor of greater transparency was not enough to save the political intelligence disclosure provisions. Even before their most recent slash and burn attack on the STOCK Act, which gutted the bill’s disclosure provisions, Eric Cantor bowed to pressure from Wall Street and stripped the political intelligence language from the bill before allowing it to come to a vote. Rather than holding firm on its own stronger version of the bill, the Senate simply took up the weaker House version.

And now the SEC is questioning Mark Hayes, a lawyer who served for seven years under Senator Grassley as Health Policy Director and Chief Health Counsel for the Senate Finance Committee. We don’t know the full extent of the relationship between Hayes and Height Securities, or whether Height had multiple sources feeding it information from Congress—mandatory disclosures would probably help clear that up—but an email from Hayes to a Height Security analyst said that a “high-level deal had been made that would provide a benefit to health insurers.” Soon after, the surge in trading on health company stocks began.

It often takes a scandal to convince Congress to act. Perhaps the SEC’s investigation will result in enough outrage that a bill providing disclosure of political intelligence activities can be signed into law.