Hedge Funds Hit 'The Hill'

Hedge fund managers are looking to Capitol Hill to hear market-moving information, and some are hiring lobbyists, not to influence government, but to tell them what to do, according to the Wall Street Journal. The Securities and Exchange Commission is looking into whether laws are being broken in the transfer of information between Congress and Wall Street. It is not illegal to disclose information that is not publicly known about the workings of Congress, even if it could affect stock prices. It only breaks congressional ethics rules if elected officials or their aides directly profit. However, the SEC is trying to figure out whether the passing of market-sensitive information by lobbyists to investors could violate insider-trading law. Some congressional staffers say they now receive nearly as many phone calls from lobbyists asking abut the status of legislation as they get from lobbyists asking to change legislation. “The amount of insider trading going on in these halls is incredible,” says one aide to a Republican lawmaker. Clint Carlson, who runs Dallas-based Carlson Capital, a $3 billion hedge fund, says his firm deals with a number of lawyers with Washington expertise in order to track public-policy developments. “ You have to watch the line. If you’re worried it might be inside information, it’s best not to use it, even if it’s legal.” The use of lobbyists as tipsters is drawing attention from Congress. After winning control of the Senate and House last month, the Democrats are considering requiting lobbyists to disclose their political-intelligence clients. Currently, lobbyists only have to disclose their work for clients seeking to influence government, while hedge funds and other clients seeking market-beating tips can remain anonymous.   The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.