Bill Targets Insider Trading By Government Officials

Bill Targets Insider Trading By Government Officials - 1/27/2009

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Bill Targets Insider Trading By Government Officials
Christie Smythe

Securities Law 360. January 27, 2009
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EXCERPT: Hoping to extend the concept of insider trading to government employees in possession of nonpublic information, lawmakers have introduced a bill in the U.S. House of Representatives that would make it illegal for federal officials and their staff to trade on such information gained in their employment. On Monday night, Reps. Louise Slaughter, D-N.Y., and Brian Baird, D-Wash., introduced the Stop Trading on Congressional Knowledge, or STOCK, Act. The bill was also sponsored by Rep. Tim Walz, D-Minn., according to legislative records. “Members of Congress and their staff should not be above the law when it comes to profiting from sensitive information,” Baird said in a statement issued by his office Tuesday. “Privileging a select group of investors with confidential information about congressional activity is not only a misuse of a congressional office, it also undermines investor confidence about the fairness and integrity of the securities market,” he said. House Bill 682, which amends the U.S. Securities and Exchange Act of 1934, would prohibit any congressional or executive branch employee from buying or selling securities or commodities futures if such a person is in possession of nonpublic governmental information, such as any information that might be related to pending or prospective legislation. According to the bill sponsors, members of Congress are not currently liable for insider trading if they use nonpublic information to make investment decisions or pass tips along to other investors, making the temptation strong to use that information. Referencing a 2004 report from Georgia State University, the sponsors noted that U.S. senators have typically received investment returns about 25 percent higher than typical investors achieve, possibly as a result of their insider knowledge. The bill also seeks to curb the trafficking of such information about upcoming legislation by political intelligence firms.

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