The chairman of the House Financial Services Committee, U.S. Rep. Spencer Bachus (R-Ala.), is under investigation by the Office of Congressional Ethics (OCE) for suspected insider trading. Rep. Bachus oversees the banking and financial services industries as part of his duties in the House of Representatives.

Alerted by suspicious trades on routinely filed disclosure forms, the OCE launched the securities fraud investigation a few months ago. A source says OCE believes it has probable cause that insider trading violations occurred. This is the first insider trading case to involve a member of Congress.

Most of Bachus's investments were for options that would allow him to buy or sell stocks at set prices at some time in the future. He received modest returns on some of the trades that are under scrutiny, and he lost money on others. For instance, Bachus exercised options on railroad stock after having served on the House Transportation and Infrastructure Committee and made a $16,588 profit in one transaction. A month later, however, he lost $2,900 on a similar transaction.

After a private briefing on the economy with Federal Reserve Chairman Ben S. Bernanke, Bachus made a move that was, in effect, a wager that the economy would decline. He traded short options and made over $18,000 in profits the day after the briefing. However, a month later, a wager that the economy would improve resulted in his losing $21,558. These short-option transactions triggered a "60 Minutes" story on Bachus's suspicious investments in late 2011.

Bachus, a former lawyer, has denied the allegations. He points out that information in the "secret" meeting was disclosed in a press conference immediately afterward and that he hadn't needed the briefing to know that the economy was declining.

Source: Washington Post, "Rep. Spencer Bachus faces insider-trading investigation" Haraz N. Ghanbari, Feb. 10, 2012