SEC Accuses Former Congressman of Insider Trading

Insider trading is when someone with access to special information makes stock trades before that information becomes public. When performed at a large enough scale, it can swing markets and puts regular stock traders at a massive disadvantage.

The Security Exchange Commission (SEC) has charged former Indiana Representative Stephen Buyer with insider trading.

The securities watchdog is accusing the former Republican congressman of making at least two illegal stock purchases after leaving Congress in 2011. The agency is seeking to force Buyer to surrender the profits he made off of the trades.

The first alleged illegal stock purchase came in 2018 after Buyer purchased $568,000 in Sprint stock shortly before the company’s merger with T-Mobile became public information. Buyer started a consulting company, Stephen Buyer Group, after leaving Congress and counted T-Mobile as a client. Buyer allegedly learned of the merger after golfing with a T-Mobile executive.

Buyer sold his sales after news of the merger leaked to the public and pocketed more than $107,000, according to the SEC’s complaint.

The second alleged illegal stock trade was even more profitable for Buyer. The SEC says he purchased $1 million worth of stock in Navigant Consulting before another client of the Stephen Buyer Group, Guidehouse LLP, purchased the firm. Buyer allegedly pocketed more than $270,000 in ill-gotten gains during that trade.

In both cases, Buyer allegedly tried to hide his activities by spreading the trades out through multiple accounts, including those owned by his son, wife, cousin, and an acquaintance.

"When insiders like Buyer – an attorney, a former prosecutor, and a retired Congressman – monetize their access to material, nonpublic information, as alleged in this case, they not only violate the federal securities laws, but also undermine public trust and confidence in the fairness of our markets," Gurbir S. Grewal, Director of the SEC Enforcement Division said in a press release. "We are committed to doing all we can to maintain and enhance public trust by leveling the playing field and holding Buyer accountable for illegally profiting from his access."

There are eight other defendants in the case against Buyer, including a former FBI trainee and an investment banker.

Perhaps Buyer would have been better served by doing his insider trading while a member of Congress. Since the STOCK Act was passed in 2012, at least 66 members are known to have violated the regulation meant to prevent insider trading by members of Congress. That list includes Kentucky representative Rand Paul, who was 16 months late in reporting that his wife invested in a biopharmaceutical company that made antiviral drugs thought at the time to be effective against COVID-19.

The fine for violating the STOCK Act starts at a mere $200, and it is not known how often it is actually paid.