Requiring more disclosure from "politicalintelligence" entrepreneurs who gather information on Congress and othergovernment activities and sell it to investors would help securities regulatorsin their investigations of insider trading, congressional watchdogs saidThursday.
At the same time, however, the Government AccountabilityOffice said it is skeptical about the ability to determine how much the rapidlygrowing political intelligence industry impacts trading and other investmentdecisions.
"Even when a connection can be established betweendiscrete pieces of government information and investment decisions, it's notalways clear whether such information could be definitively categorized asmaterial," the GAO said in its report.
Securities and Exchange Commission officials told the GAO,Congress' investigative arm, that requiring more transparency from politicalintelligence providers would aid the commission. "More information couldallow enforcement staff to identify relationships or make connections betweenthe various individuals involved in an investigation of potential insidertrading," the GAO said, according to the report.
It's also difficult to determine how much nonpublicinformation is being sold to clients as political intelligence, according tothe report. Many of the political intelligence firms meld information they'veobtained with other analysis and research, the GAO said.
According to the report, Congress would also have to weighany new regulations with "related practical and legal issues"including additional costs.
The GAO report was required under a law passed by Congresslast year banning insider trading by lawmakers, aides and other governmentofficials and requiring more financial disclosures from them.
Republican Sen. Charles Grassley and Democratic Rep. LouiseSlaughter, who led the effort to pass the so-called STOCK Act, released a jointstatement saying the GAO report showed the importance of transparency in thepolitical intelligence industry.
"When a political intelligence professional is paid togather inside information from congressional or agency sources that can be usedto make investment decisions, that professional should have to register anddisclose his or her activities to the public," Grassley and Slaughter saidin the statement.
The Wall Street Journal reported Thursday on how a reportfrom Height Securities, a Washington-based firm, to Wall Street clients onMonday led to a flurry of trades involving healthcare companies.
A report from the company predicted, correctly,that the Obama administration would reverse a previously announced decision tochange Medicare Advantage rates. Soon after the report came out, according tothe Journal, shares of several large insurance companies rose as much as 6percent.