U.S. court to weigh lawmakers' immunity in trading investigations

[June 13, 2016]  By David Ingram
 
 NEW YORK (Reuters) - A federal appeals court will consider on Monday whether a U.S. congressional committee and one of its former staff are immune from having to cooperate with an insider-trading investigation.

A three-judge panel of the 2nd U.S. Circuit Court of Appeals plans to hear arguments on enforcing two subpoenas that the U.S. Securities and Exchange Commission (SEC) sent to Congress as part of its investigation. The arguments are scheduled for about 11 a.m. (1500 GMT) in New York City.

The case is a test of how far securities enforcers may go as they try to police the murky world of so-called "political intelligence," in which firms seek to gather and sell information for traders.

The SEC is investigating the trading of Humana Inc stock in 2013 ahead of a government announcement about physician reimbursement rates, which affect the revenue of Humana and other health insurers.

No charges have been brought in the insider-trading probe. The SEC said in court papers that it believes a congressional staff member at the time, Brian Sutter, "may have been a source" of an early leak to a lobbyist at the firm Greenberg Traurig who then passed the information to a Height Securities analyst, who in turn alerted clients.

Sutter and his lawyer could not be reached for comment on Friday. A spokesman for Humana also could not be reached, and a spokeswoman for Greenberg Traurig had no immediate comment. Height Securities said in a statement it has never received a subpoena from, or been the subject of a formal order of investigation by, the SEC.

Members of Congress and their staff are not immune from prosecution under insider-trading laws.

But Sutter and his former employer, the U.S. House of Representatives' Ways and Means Committee, are refusing to comply with the SEC subpoenas for documents and testimony. Their lawyers argue they are immune from such investigative tactics because under the legal principles of sovereign immunity and legislative independence they cannot be questioned without their consent.

The seal of the U.S. Securities and Exchange Commission hangs on the wall at SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

"The SEC remains free to investigate any alleged congressional insider trading in a host of ways," such as obtaining materials from investment funds, the lawyers wrote in court papers.

SEC lawyers argue a ruling in favor of congressional immunity could be abused by corrupt lawmakers. That would "defeat the right of the public to honest representation," the lawyers wrote.

A lower court ruling, now under review, said in November that the committee and Sutter were required to generally comply with the SEC subpoenas.

(Reporting by David Ingram; Editing by Noeleen Walder and Andrew Hay)

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