By Sneha Shankar - The Securities and Exchange Commission Friday asked a federal court to implement stronger subpoenas on the House Committee of Ways and Means. The agency is also seeking to have Brian Sutter, a top health-care official, submit information that it believes reveals is important in an insider trading probe being conducted by the SEC, the Wall Street Journal reported.
The court in the Southern District of New York, demanded to know why the two parties did not comply to the subpoenas and asked them to submit a response by June 26. It has also asked the House and Sutter to appear for a hearing on July 1. Lawyers for Congress said that the defendants were allowed to ignore SEC’s requests because they were protected by the Constitution, according to the Journal. The SEC is investigating how a major change, which was made to the health-care bill on April 1, 2013, reached the traders at Wall Street before the U.S. government announced it.
The SEC reportedly said in the court that their "objections lack merit, and the subpoenas satisfy all the requirements for enforcement," according to the Journal, while the House said that the subpoenas by the SEC "run seriously afoul of the Constitution's speech or debate clause, and we expect to respond in due course on that ground, among others."
The Congress has several legal protections as stated in the U.S. constitution, including investigations without a warrant from executive branch agencies like the SEC. The court is due to decide whether the Congress’s resistance to the subpoenas is irregular.
“It's not unheard of for an agency to serve a subpoena to Congress, but for an agency to sue is—if not unprecedented—at least very rare,” Michael Stern, former senior counsel to the U.S. House, said, according to the Journal. He added: “It shows that there is a serious conflict; the SEC really wants the information and the House really wants it protected.”
Mark Hayes, a health-care lobbyist had sent a mail to an investment-research firm, based on information from “credible sources,” informing of a change in the health-care bill before the announcement was made public. Within minutes, this caused the shares of major health-care firms to soar, closing at almost 6 percent higher, the Journal reported.
The SEC, in Friday’s filing, alleged that members of the House had leaked the information to Hayes, though not referring to him directly, and made revaluations accordingly.
"We are cooperating with the inquiry and will continue to do so," a spokesperson for Greenberg Traurig, Hayes’ lobbying company, told the Journal.
SEC’s filing reportedly said that its investigation pointed toward the possibility that “Sutter may have been a source of [Mr. Hayes's] nonpublic information,” according to the Journal.
"With the benefit of some time for reflection, Mr. Sutter's best recollection now is that he previously may have used his mobile telephone to speak with [Mr. Hayes] although he is not certain," the SEC filing reportedly said, citing it in an official letter written by the House’s lawyer to the FBI and the the U.S. Department of Health and Human Services. The filing also sought further information from Sutter on the : "It is also possible that Mr. Sutter may have made other statements in the course of his interrogation that, while an accurate reflection of his memory at the time, might merit clarification if, for example, Mr. Sutter were to review records that could refresh his memory."