Insider trading improves the efficacy of financial markets actually, since it allows markets to take non-public information into account. The bigger problem is that it opens up avenues of market manipulation and causes conflicts of interest.

It's the same conflict of interests problem here. Are your politicians acting for the sake of the public, or do they have their own financial interests in mind when putting forth a policy? E.g. if they've made financial commitments in expectation of a policy that will benefit that investment, that can most certainly influence their decision on said policy.