Political Intel Firm Sanctioned Over Help for Hedge Fundsby
SEC says Marwood lacked safeguards for nonpublic information
Agency has been scrutinizing trading tied to policy changes
A firm that helps guide hedge funds’ responses to government actions is being sanctioned by regulators over its acquisition and handling of possibly nonpublic information, as regulators crack down on the flow of trading tips from Capitol Hill to Wall Street.
Marwood Group LLC will pay $375,000 to settle Securities and Exchange Commission claims that it lacked sufficient standards to prevent misuse of inside information, the agency said in a statement Tuesday. The firm, founded in 2003 to provide research on the outcomes of health-care regulation, also agreed to retain an independent compliance consultant, the SEC said.
“When political intelligence firms like Marwood Group obtain information from government employees, they must take the necessary steps to prevent the dissemination of potentially material nonpublic information obtained in the course of their research,” Andrew Ceresney, the SEC’s director of enforcement, said in the statement.
Marwood encouraged employees to maintain relationships with federal employees at the Centers for Medicare and Medicaid, and the Food and Drug Administration to gather content for the firm’s research, the SEC said. The firm distributed the reports without obtaining approval from its compliance department.
“This administrative resolution addresses conduct that occurred in 2010, which the firm proactively has since taken steps to remediate,” Michael McKeon, a Marwood spokesman, said in an e-mailed statement. “We are pleased that this settlement finally puts this matter behind us.”
The SEC has been cracking down on how inside information from government employees ends up in possession of Wall Street traders. A federal judge last week ruled that the House Ways and Means Committee and a former top staff member must obey subpoenas in an SEC insider-trading investigation tied to health-care legislation.
The Wall Street regulator’s ability to police trades made on information from Capitol Hill was strengthened by the 2012 Stop Trading on Congressional Knowledge Act, or Stock Act, which requires public officials to keep confidential non-public information about government matters that could move stock prices.