was an obscure research analyst in
Washington at a small
Height Securities LLC when
he scored an amazing scoop last week.
In a 75-word
note to clients on April 1, Simon predicted the government would increase
certain pay rates for health insurers that had been scheduled for cuts. He
didn’t say where he got this idea, only that he believed it would happen.
And it seemed to be more than a guess. The headline on his report said:
“FLASH -- Medicare Advantage Rates.”
proven right when the government released its decision later that day
after stock markets had closed. By then, the shares of some insurers had
soared, including those of
Humana Inc. (HUM) and
Health Net Inc. (HNT),
which Simon had cited favorably in his report.
financial journalists break news like this for their paying customers,
they get praised as market movers. Simon and his firm instead have gotten
lots of headaches.
Charles Grassley of
Iowa this week sent Height
letter asking for lots of
demanding to know how Simon
got his information -- as if the senator would try bullying a major
newspaper or television network this way. News organizations that should
be kicking themselves for getting scooped have
spotlighted Height as an
example of what’s wrong with the so-called political-intelligence
industry. The insinuation is there must be something untoward about a
person with a broker’s license doing what beat reporters do routinely.
been no sign that Simon or his firm violated any confidentiality
obligations, engaged in
insider trading, paid
bribes, or otherwise did anything improper. Maybe someone told Simon
something without permission, but that wouldn’t be the analyst’s problem.
Journalists get stories all the time by sweet-talking people into blabbing
things they shouldn’t. There’s nothing wrong with that.
the ranking Republican on the Senate Judiciary Committee, also has
requested documents from
the Centers for Medicare and Medicaid Services, including a
list of people who had
advance notice of the agency’s rate decision.)
As for “political
intelligence,” this is a fancy term for information that is
obtained by reading things or talking to people. Likewise, a “political
professional” is someone
with a phone, a notepad and access to federal employees. Grassley says
these outside snoops should have to register with the government, and he
wants new laws requiring it. An exception might be made for someone who is
a “representative of the media,” whatever that’s supposed to mean.
District of Columbia maitre
d’s, bartenders, barbers and taxi-cab drivers had better watch out the
next time they trade
gossip for bigger
political intelligence professional is paid to gather inside information
from congressional or agency sources that can be used to make investment
decisions, that professional should have to register and disclose his or
her activities to the public,” Grassley
said April 4 in a joint
statement with U.S. Representative Louise Slaughter, a
New York Democrat.
“activities” looks especially creepy. If someone gets valuable information
in a legal way, isn’t barred from trading on it, and isn’t obligated to
keep it confidential, it’s none of the government’s business what that
person does with it. Sell it, whisper it, buy stocks, do nothing,
whatever. Grassley touts his plan as a step toward transparency, akin to
lobbyist registrations. It’s more like a government
invasion of privacy. This
is about controlling citizens, not protecting them. You have to wonder if
it would survive a constitutional challenge.
Simon and Height Securities are already registered with the Securities and
Exchange Commission and the Financial Industry Regulatory Authority.
Anyone can go to the regulators’
websites and find detailed
reports about Simon and the
Securities is an SEC-registered broker-dealer and not a lobbying or
political-consulting firm,” Andrew Parmentier, one of Height’s managing
partners and founders, said in an e-mail to
Bloomberg News. “We issue
research reports in accordance with a comprehensive regulatory regime. We
are highly confident our April 1 report was based on good research,
conducted in accordance with this regulatory regime. We look forward to
demonstrating this to
most affected by new rules would be everyone else deemed to be in the
political-intelligence trade -- a large universe that includes everyone
from law firms and consultants, to researchers for public-pension plans
hedge funds, or even
Washington socialites trying to make a few bucks on the side.
Grassley’s first attempt at such a requirement. Last year, Congress passed
something called the
Stop Trading on Congressional
Knowledge Act, which promised to crack down on insider trading
among the legislative set, although there’s little reason to believe it
will change much of anything. Grassley
wanted to mandate
disclosure of political-intelligence activities, but his proposal was
stripped from the bill at the last minute. And thank goodness. The
government has enough information about what all of us do on our own time.
As for Justin
Simon, he should have a bright future as an enterprising journalist if
things don’t work out for him as a stock analyst.
Weil is a Bloomberg View columnist. The opinions expressed are
the writer of this article: Jonathan Weil in New York at
the editor responsible for this article: James Greiff at
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