I heard from Senate sources that the STOCK Act to ban Congressional insider trading will come up for a cloture vote next week. This is great news. As regular readers know, I'm a strong advocate of the bill in general and, in particular, of the version that was passed out of the Senate Committee on Homeland Security and Governmental Affairs. Coupled with the fact that President Obama asked Congress in his State of the Union address Tuesday to pass this legislation and send it to his desk for signature, a positive Senate vote might light a sufficient fire under Eric Cantor to get the bill moving in the House. We might actually finally win this thing.
Speaking of Cantor, I'm still trying to get a Twitter campaign going to send the message to Eric Cantor that it's time for Congress to ban insider trading by its members by passing the Senate version of the STOCK Act. If you want to help, tweet the hash tag #PassTheSenateSTOCKAct to both his accounts: @EricCantor @GOPLeader
For prior PB.com coverage, go to the archive.
For extended analysis, see my article Insider Trading Inside the Beltway, which argues that:
A 2004 study of the results of stock trading by United States Senators during the 1990s found that that Senators on average beat the market by 12% a year. In sharp contrast, U.S. households on average underperformed the market by 1.4% a year and even corporate insiders on average beat the market by only about 6% a year during that period. A reasonable inference is that some Senators had access to – and were using – material nonpublic information about the companies in whose stock they trade.
Under current law, it is unlikely that Members of Congress can be held liable for insider trading. The proposed Stop Trading on Congressional Knowledge Act addresses that problem by instructing the Securities and Exchange Commission to adopt rules intended to prohibit such trading.
This article analyzes present law to determine whether Members of Congress, Congressional employees, and other federal government employees can be held liable for trading on the basis of material nonpublic information. It argues that there is no public policy rationale for permitting such trading and that doing so creates perverse legislative incentives and opens the door to corruption. The article explains that the Speech or Debate Clause of the U.S. Constitution is no barrier to legislative and regulatory restrictions on Congressional insider trading. Finally, the article critiques the current version of the STOCK Act, proposing several improvements.
Also, don't forget that you can buy a personally signed copy of my book on insider trading at eBay. Other eBay sellers charging up to $20. I'm selling it at $4.99 plus S&H