‘Largest Hedge Funds’ Caught Up In House Insider-Trading Investigation

Jul 18 2014 | 1:05pm ET

“Some of the largest hedge funds” in the U.S. have been ensnared in a Securities and Exchange Commission insider-trading probe stemming from an investigation into whether Congressional staffers tipped a research firm about a change in healthcare policy.

The SEC said it is looking at some 44 investment firms, including “some of the largest hedge funds and asset management advisers in the nation.” It did not identify any of the firms, but The Wall Street Journal has reported that the former SAC Capital Advisors and Viking Global Investors were among the hedge funds trading shares of health insurers after Height Securities told clients about a potentially beneficial change to healthcare policy just minutes before it was announced.

The regulator made its disclosure as part of a lawsuit against the U.S. House of Representatives. It sued the House and top Ways and Means Committee healthcare staffer Brian Sutter after both refused to comply with SEC subpoenas.

The SEC is looking into whether Sutter disclosed the policy change to a lobbyist at Greenberg Traurig, who in turn allegedly told Height Securities. The disclosure of the scope of the investigation, which is “much wider” than described by House lawyers, came in the SEC’s response to the House’s bid for a dismissal.

The SEC brought its lawsuit in New York federal court, where 25 of the 44 firms it is probing are based, it said.

“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 on April 1” of last year, the SEC wrote in its filing.

The House argues that its staff is “absolutely immune” from the SEC subpoenas, and that the case should be heard in Washington federal court, anyway.

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