Sen. Charles Grassley is expanding his investigation of whether investors were tipped off about a Medicare policy change that may have sparked a wave of stock buying in the days before it was announced.
The Iowa Republican is trying to determined who may have divulged information about the Medicare change during a March 18 conference call with investors three days after the government decided to restore funding for private insurers offering Medicare Advantage plans, the Wall Street Journal
"The scope of the political intelligence industry is unknown," Grassley said. "We’re learning more as this situation unfolds. I intend to pursue information on any firms’ involvement in getting a jump on a major government policy decision with implications for Wall Street."
Trading in health insurance stocks spiked on April 1, the Journal reported, noting that one minute before the stock prices jumped, the Washington investment and research firm Height Securities sent an alert to traders informing them of the policy decision, even though it had not been made public.
Shares in several healthcare companies spiked that day, resulting in a one day gain of 336 percent for one trader's clients.
The conference call Grassley is focusing on was arranged by Capitol Street Health Policy Research, a group that provides research and analysis of healthcare policy decisions to Wall Street. The company, and similar firms on the hill, also try to predict future government decisions and interpret prior ones for the benefit of their clients.
Ipsita Smolinski, the managing director of Capitol Street, has agreed to meet with investigators from Grassley's office to discuss the call, the Journal reported Friday. She told the Journal that Carlton "had no idea what the agency was going to do."
"No one has any idea what an agency is going to do until they do it," she added.
She stressed that her firm uses only "public information, and in this instance that holds."
Meanwhile, Hatch's communications director, Antonia Ferrier, said her boss "has a zero tolerance policy for anyone who would take advantage of privileged information and he's confident that no one on his staff has done that."
The Securities and Exchange Commission is also looking into the Medicare leak and the trading that may have resulted, the Journal reported, citing a source.
Regardless of the outcome, the Journal said the case suggests that government officials are looking to crackdown on how Washington handles sensitive information and on companies that lobby Congress and share information that could impact the stock market.
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