I reported a few weeks ago on a study finding an unusual level of stock trading profits being made by US Senators, which implied that they were traing on the basis of inside information learned on the job. Securities Litigation Watch now reports that the SEC has decided not to go forward with an investigation:
As reported in this article in Sunday's Philadelphia Inquirer, the authors of the study conclude that these results "suggest that senators are trading stock based on information that is unavailable to the public, thereby using their unique position to increase their personal wealth...." The study adds that it is as if "senators knew appropriate times to both buy and sell their common stock." The article quotes Ziobrowski as stating in a recent interview that "there is cheating going on, at a 99 percent level of confidence."
The Inquirer article states that according to Ari Gabinet, head of the SEC's Philadelphia Office, "agency staff reviewed a draft of the study in March but decided not to press the issue because it is hard to win insider-trading cases without detailed knowledge of what, if any, privileged information the subjects received and proof insiders used it to trade. The SEC lacked such information in the senators' case."
Huh? Yes, it's hard to win insider trading cases but the SEC does so routinely by using its subpoena power to gather documents and testimony that often will provide "detailed knowledge of what, if any, privileged information the subjects received and proof insiders used it to trade."
The article also points out that "the SEC may have little incentive to tangle with the Senate, given their relationship. Senators approve members of the SEC's governing body, as well as the agency's budget."
Gee, you think? If it had been anybody else than US Senators, the SEC would have been sending out subpoenas and combing trading records and generally doing its thing. Anyway, kudos to SLW for a great followup on an interesting story.
