SEC files lawsuit to enforce insider trading subpoenas issued to Congress

[JURIST] The Securities and Exchange Commission (SEC) [official website] on Friday filed a lawsuit in the US District Court for the Southern District of New York [official website] hoping to compel Congress to comply with subpoenas it received requesting information on an insider trading case the commission is investigating. The subpoenas ask for documents and information [WSJ report] from members of the House Committee on Ways and Means [official website] and from Brian Sutter, a top congressional health-care aid, to assist in its insider-trading investigation. Federal investigators claim they have evidence indicating that Sutter, in April 2013, illegally tipped off Wall-Street investment traders on upcoming, not-yet-publicized, governmental health care policy changes that could affect the trading market. On the day of the alleged tip-off, share prices of major health-insurance companies increased as much as 6% in the moments before the Wall Street trading markets closed. The health-care policy changes were made public that evening. A federal judge has given the House Committee and Sutter until June 26 to respond and has ordered them to appear at a hearing on July 1. Congress argues it does not have to comply with the subpoenas based on Constitutional protections and asserts that the SEC has overreached in the matter.

Insider trading based on Congressional knowledge has been a major focus in the Obama administration. In September 2012 a Federal judge blocked [JURIST report] an act aimed at stopping insider trading by members of Congress and other high-level federal employees. The proposed law, Stop Insider Trading on Congressional Knowledge Act [PDF], was challenged [JURIST report] by the ACLU on the grounds that the law's requirement that federal employees disclose all financial transactions over $1000 is unconstitutional and an invasion of their privacy. President Obama signed [JURIST report] the bill into law in April 2012 intending to add transparency and accountability in securities trading, and to hold accountable those who abuse their privileged knowledge.

 

About Paper Chase

Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

© Copyright JURIST Legal News and Research Services, Inc., 2013.