When Senate Democrats finally brokered a compromise over the proposed health-care law, a group of hedge funds were let in on the deal, learning details hours before a public announcement on Dec. 8, 2009. The news was potentially worth millions of dollars to the investors, though none would publicly divulge how they used the information. They belong to a select group who pay for early, firsthand reports on Capitol Hill.

Seeking advance word of government decisions is part of a growing, lucrative—and legal— practice in Washington that employs a network of brokers, lobbyists and political insiders who arrange private meetings between hedge funds and officials, including lawmakers and their aides.

With markets moving sharply on actions in Washington, hedge funds and other big Wall Street players are willing to pay for access. News tips, combined with data and analysis, help steer firms to profitable investment decisions. 

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Many turn to William Williams, president of JNK Securities, a firm that brings lawmakers and investors together “to bridge the information gap between Washington and Wall Street,” according to a recent news release.

Mr. Williams used to charge clients as much as $10,000 for meetings with lawmakers. That changed last year after a reporter from the publication Inside Higher Ed asked the office of Sen. Tom Harkin (D., Iowa) about an email from JNK showing it was charging to attend a possible meeting with the senator. Mr. Harkin refused to attend.

Now, hedge funds don’t pay fees to JNK Securities. If they use information gleaned at these face-to-face meetings they are expected to execute their trades through the brokerage firm, which collects commissions.

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On Jan. 28, 2010, his group met on Capitol Hill with Sen. Christopher Dodd, the Connecticut Democrat, now retired, who chaired the Senate’s Banking Committee, according to attendees.

At the time, investors assumed Mr. Dodd would support legislation from Sen. Richard Durbin (D., Ill.) to cap fees that Visa Inc. and MasterCard Inc. collect on debit-card purchases. The possible fee cap weighed on the share price of the two credit card giants because it would shrink revenues.

Mr. Dodd signaled to the hedge funds that he wouldn’t include Mr. Durbin’s provision in his bill, a position favorable to Visa and MasterCard that didn’t surface for weeks, according to people at the meeting.

Among the funds attending was Conatus Capital Management, with $2.5 billion under management. In the first quarter of 2010, the hedge fund added more than 300,000 shares of Visa, according to public filings, a 50% hike that brought its holding to 950,000 shares.

Visa share prices rose from $81 at the end of January to a high of about $96 in April before falling to around $70 by mid-May.