As some of our readers know, businesses must follow strict procedures when it comes to the information they release to the public. This is especially true if this information will have a dramatic impact on their stocks. Releasing the information without proper approval from the Securities and Exchange Commission can lead to serious litigation, especially in cases of insider trading.
According to many sources, this appears to be the problem facing one firm who SEC believes participated in insider trading practices in April. The government agency has since issued subpoenas to the firm and individuals in connection with the leak of information surrounding a Medicare decision that was worth billions of dollars to investors.
In the timeline of events, allegedly 436 employees at the Department of Health and Human Services had been given advanced notice about a government decision to favor private health insurers who participated in the Medicare program. According to the Washington Post, an alert was sent out 18 minutes before the end of trading day which sparked a surge of trading. The official government announcement was not made until after the trading day had closed.
Some people who are familiar with the case say that this falls under a new issue being tracked by SEC called "political intelligence," which specializes in providing government information to investors for a fee. Although the individuals involved are facing rather serious charges, all of the parties deny the accusations against them, stating that the alert that was given to the people on the trading floor was in accordance with all applicable laws and regulations. It's unknown at this time whether the case will go to court or not.
Source: The Washington Post, "Hundreds in government had advance word of Medicare action at heart of trading-spike probe," Tom Hamburger and Dina ElBoghdady, June 9, 2013