At Deal Journal, Shira Ovide writes that:
In light of the Wall Street Journal’s Page One article today about Congressional aides profiting from timely stock trades in companies for which their bosses wrote laws, Deal Journal took a look back at two pieces of research into the fortuitously good stock-trading skills on Capitol Hill.
The first was Alan J. Ziobrowski's 2004 study that found U.S. senators’ stock picks beat the market by an average of about 12 percentage points a year during a stretch of the 1990s.
That brings us to a second article, by UCLA corporate-law professor Stephen Bainbridge, looking into whether and how insider-trading laws apply to members of Congress and their staff. Members of Congress, as the Journal and Bainbridge write, aren’t covered by insider-trading laws.
Bainbridge says, however, that their staff members could be found to be illegally trading stocks because of a Supreme Court case, U.S. v. O’Hagan, which found employees who misappropriate confidential information from their jobs are defrauding their employers and clients. That fraud is enough to kick in insider-trading liability. In short, Bainbridge says Capitol Hill staffers don’t have the same immunity from prosecution that their bosses have.
As the Journal points out, a piece of legislation called the STOCK Act proposes to bar members of Congress from trading securities based on nonpublic information they obtain. The bill so far has languished.
“Is it really surprising that this has gotten stuck?” Bainbridge said in an interview. “Until there is a very big scandal, it’s one of those classic good government reforms that will go nowhere.”
