Congressmen Give Themselves A Loophoole Filled Insider Trading Bill

Since it has become widely known that members of Congress are exempt from insider trading laws, an uproar has forced Congress to bring themselves under the scrutiny of the SEC for insider trading laws.

It should probably come as no surprise, but Congress has put together a bill to regulate against insider trading by members of Congress that is so full of loopholes that it will actually make it easier.

Yale law professor Jonathan Lacey writes in WSJ:

Members of Congress already get better health insurance and retirement benefits than other Americans. They are about to get better insider trading laws as well...

Strangely, while insider trading by corporate insiders has long been the white collar crime equivalent of a major felony, the Securities and Exchange Commission has determined that insider trading laws do not apply to members of Congress or their staff. That is because, according to the SEC at least, these public officials do not owe the same legal duty of confidentiality that makes insider trading illegal by nonpoliticians.

The embarrassing inconsistency was ignored for years. All of this changed on Nov. 13, 2011, after insider trading on Capitol Hill was the focus of CBS's "60 Minutes." The previously moribund "Stop Trading on Congressional Knowledge Act" (H.R. 1148), first introduced in 2006, was pulled off the shelf and reintroduced. The bill suddenly had more than 140 sponsors, up from a mere nine before the show.

The "Stock" Act, as it is called, would make it illegal for members of Congress and staff to buy or sell securities based on certain nonpublic information. It would toughen disclosure obligations by requiring congressmen and their staffers to report securities trades of more than $1,000 to the clerk of the House (or the secretary of the Senate) within 90 days...

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