Congressional Aides Can’t Abet Insider Trading, Can't Not Talk To SEC About Insider Trading

First rule of Congress is you don't talk about Congress.
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What happens here, stays here, or you'll have to have a little chat with Mary Jo White's people.

Don’t get U.S. District Judge Paul Gardephe wrong: Those in the employ of the legislative branch don’t have to dish about everything, because that would violate an obscure clause in the Constitution.

Because, hey, Judge Paul Gardephe has read the Constitution and he digs it... a lot.

But if a top aide to the most powerful committee on Capitol Hill were to, for argument’s sake, find out about an impending change in federal health-care policy from someone outside the legislative branch and then leak that confidential information to a lobbyist who then told a research firm which then told its clients which then sent health-insurance stocks through the roof, he’d have to do a little more than just hand over his address book.

And Congress will too because its precious “speech and debate clause” stops at the top of those big white marble stairs in Washington.

The court sided with Congress in ruling that the committee and Mr. Sutter didn’t have to provide information that was directly related to “legislative activity.” However, the court said that documents and information that fall outside of “legislative activity” must be produced.

The judge also said that the speech and debate clause “does not protect the dissemination of information outside of Congress….”

Mr. Sutter could be required to provide information about his conversations with individuals at the Centers for Medicare and Medicaid Services, which made the health-insurance policy announcement after financial markets closed.

Mr. Sutter could also be required to provide information about his conversations with a lobbyist who appears to be the source of the alert that Height Securities sent to Wall Street on April 1, 2013.

Court Says Congress Must Comply with Federal Insider-Trading Investigation [WSJ]

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After The STOCK Act It Will Still Be Legal To Trade On Congressional Inside Information*

Here's a sort of touching monologue from David Einhorn's call with Punch: If you’ve done the analysis, and come to the conclusion that on it’s own, the company is not going to make it, it makes all of the sense in the world to raise equity at whatever the price is, so that you can know that the company, you know, is – is going to make it. Now, what that brings to my mind though is, you know, obviously we haven’t done your analysis, we haven’t done -- signed an NDA; I don’t know that we’re going to sign an NDA, because we prefer to just remain investors, but from my perspective, and I’ll be just straight up with you, is that gives a lot of signalling value. And the signalling value that comes from figuring out the company has figured out that it’s not going to make it on it’s own is that we’ve just grossly misassessed the -- you know what’s going on here. And -- and that, that will cause us to have to just reconsider what we’re doing, which is not the end of the world to you. You will continue on even if we don’t continue on with you. You could sort of see why the FSA read that to mean that he was insider trading. Like ... (1) You have told me something with signalling value. Sorry - "a lot of signalling value." (2) I will now act on that signal. (3) Don't be mad. "Signalling value" sure sounds like it means "material nonpublic information," doesn't it? Now as we've discussed before, trading on that information would not be enough to make Einhorn guilty of insider trading in the US, though maybe it wouldn't be exactly a great idea here either. Why? Because in our weird but sort of sensible insider trading laws, it's just not illegal to trade on material nonpublic information. It's only illegal to trade based on material nonpublic information that was obtained in violation of some sort of duty of confidence. Since Einhorn didn't sign an NDA, he had no duty of confidence. And since the Punch CEO and bankers weren't tipping him for nefarious purposes, but were instead sounding him out on the company's behalf as a shareholder and potential investor in a new capital raise, they weren't breaching their duty of confidence. You could quibble with the details of that but it's basically the law here. In England not so much. That also seems to be the law for our friends in Congress, who recently passed a law making it illegal for them to insider trade, which is worrying some people who make their living from trading on Congressional inside information: