The SEC is investigating in 44 investment firms due to a possible violation of insider trading laws concerning the purchase of shares of health insurances before a government announcement in April 2013.
Among the 44 firms are some of the largest hedge funds and asset managers in the United States, all being clients of a Washington research institute passing on confidential government information. By now, there are no direct investigations against specific firms but rather a probe of whether the purchase of health insurance equity based on this information has taken place before the government announcement was made. This announcement was including the publication of a change in federal policy increasing the funding of health insurance firms.
Firms are blamed for using the information received from a Washington research institute before the public announcement was made. Furthermore, the SEC is investigating against government employees for passing on this confidential information. The SEC is doing this for the first time as it is only illegal since the US Congress passed a bill in 2012 prohibiting Congress officials to give tips concerning stocks or use the information for their own trades.
So far, it is questionable whether any charges can be draw against asset managers and hedge funds because they did not know where the information was originally coming from. To violate insider trading law, investors must know that he trades based on non-public information.
The SEC was attracted to this topic as shares of insurance companies jumped up by 6% in the final 15 minutes of the trading day that day the announcement has been made.