Another distraction has hit House Financial Services Chairman Spencer Bachus, potentially creating more obstacles for his legislation to establish a self-regulatory organization for investment advisers.
The Office of Congressional Ethics has opened an investigation into whether Mr. Bachus violated insider-trading laws by improperly utilizing information he gained as a congressional leader. The ethics inquiry centers on numerous suspicious trades, mostly of stock options, listed on his financial disclosure forms, according to the Washington Post, which broke the
story.
Mr. Bachus, an Alabama Republican, is a stock trading aficionado. He made more than 200 stock and option trades in 2008, according to The Wall Street Journal. He was the subject of a “60 Minutes” story in November on alleged congressional insider trading. He has said he stopped all trading in 2010, before he became chair of the House financial panel.
He denies that he has done anything wrong.
“I welcome the opportunity to set the record straight,” Mr. Bachus said in a statement. “I respect the congressional ethics process. I have fully abided by the rules governing members of Congress and look forward to the full exoneration this process will provide.”
The Office of Congressional Ethics could refer the inquiry to the House Ethics Committee. In the meantime, the House and Senate approved separate bills this week that would prohibit members of Congress from using material nonpublic information for their own benefit in purchasing or selling investment products.
While Mr. Bachus was sucked into the insider-trading vortex, he was thrown a life line from an unusual source.
“In my dealings over the years with Spencer Bachus, with whom I disagree on a number of policy issues, I have found him to be honorable and straightforward,” said Rep. Barney Frank, D-Mass., ranking member of the House Financial Services Committee.
In addition to the ethics investigation, Mr. Bachus faces a March 13 primary against a GOP state senator, among other
opponents. He also has indicated that he will not seek to serve as chairman of the House financial panel next year.
In the midst of all of this activity, Mr. Bachus is reworking his draft bill to establish one or more self-regulatory organizations for investment advisers. He floated the proposal in September. It has strong backing from the Financial Regulatory Authority Inc. but is opposed by a number of investment adviser advocates.
The distractions “could have an impact on (the SRO) legislation and all the other legislation the committee is working on to the extent he's focused on other things,” said a financial industry lobbyist who asked not to be identified.
