LOBBYIST MARK HAYES, a hired gun for the health insurance company Humana and former aide to Sen. Chuck Grassley (R-Iowa), is at the center of an insider trading scandal and preliminary probe by the SEC. The Wall Street Journal broke the story Wednesday:

His [Hayes’s] email to Washington investment-research firm Height Securities, alerting it to a government decision that will save the industry billions of dollars, was a final piece of confirmation Height received before blasting a news alert to its clients, according to emails and people familiar with the matter.

The government decision, made by the Centers for Medicare & Medicaid Services and not yet public at the time of Hayes’s email, reversed earlier plans to reduce Medicare Advantage payments, a big surprise to the industry.  As The Hill explains, “the case has prompted criticism of political intelligence firms, which can easily trigger movement in the stock market using insider information but are not required to register or publicly disclose their lobbying work.”

Mike Mayhew, Chairman of Integrity Research Associates, contributed to this criticism: “I don’t believe that the political intelligence and policy research industry has done a very good job of policing itself. Part of that is that it’s a gray area, so they don’t know how to police themselves.”

So did Larry Doyle, blogger for Daily Markets:

[T]rade and activity of this sort falls under the heading of trading based on “political intelligence” emanating from Washington. The STOCK Act, heretofore known as The MOLDED SWISS CHEESE Act, does not directly address this stench….Financial reform? Yeah, right!!

Perhaps the most interesting twist to the story, as the reporters at POLITICO Pro pointed out, is that Sen. Grassley began his own investigation on the leak before realizing that his former aide was involved:

Pro’s Jason Millman has an amazing story about what happened when Chuck Grassley went looking for the source of a leak of sensitive details on Medicare Advantage payment rates — and seemed to be zeroing in on a former aide. In a letter, Grassley asked whether a lobbyist at Greenberg Traurig tipped off Height Securities, a political intelligence firm, about a soon-to-be-announced increase in Medicare Advantage rates. The Wall Street Journal identified the aide as Mark Hayes, a long-time senior aide to Grassley on health policy and Medicare.