{"id":10165,"date":"2020-05-23T20:12:32","date_gmt":"2020-05-24T01:12:32","guid":{"rendered":"http:\/\/blog.uwsp.edu\/cps\/?p=10165"},"modified":"2020-06-03T10:38:52","modified_gmt":"2020-06-03T15:38:52","slug":"the-coronavirus-why-the-u-s-economy-will-never-be-the-same-part-7-what-should-change-securities-regulation-of-congress","status":"publish","type":"post","link":"https:\/\/blog.uwsp.edu\/cps\/2020\/05\/23\/the-coronavirus-why-the-u-s-economy-will-never-be-the-same-part-7-what-should-change-securities-regulation-of-congress\/","title":{"rendered":"The Coronavirus \u2013 Why the U.S. Economy Will Never be the Same Part 7: What Should Change \u2013 Securities Regulation of Congress"},"content":{"rendered":"\n

According to the Securities\nand Exchange Commission (SEC):<\/p>\n\n\n\n

\u201cIllegal insider\ntrading refers generally to buying or selling a security, in breach of a\nfiduciary duty or other relationship of trust and confidence, on the basis of material,\nnonpublic information<\/strong> about the security. Insider trading violations may\nalso include “tipping” such information, securities trading by the\nperson “tipped,” and securities trading by those who misappropriate\nsuch information.\u201d Unlawful insider trading can be prosecuted in civil\nproceedings by the Securities and Exchange Commission or in criminal actions by\nthe Justice Department. <\/p>\n\n\n\n

The primary issue\nsurrounding insider trading is trading on material, nonpublic information that\nprovides the opportunity for profit that is not available to the public. There were multiple instances of Senators on the Senate Intelligence\nCommittee selling stock during the coronavirus pandemic. Senators on the Senate\nIntelligence Committee also had access to material, nonpublic information and\nbriefings on the coronavirus and how it would impact the U.S. economy. Whether\nthe securities transactions of the Senate Intelligence Committee members were\nillegal is debatable, as well as the ethicalness of such transactions. What is\nnot debatable are the millions of dollars in profits that the transactions\nprovided; profits not afforded to the American public when information was made\npublic. The point of insider trading is that you should not be able to be\n\u201cfirst-in-line\u201d to conduct a securities transaction using insider information\nand profit before the public knows the information.<\/p>\n\n\n\n

Congress passed the\nStock Act in 2012 which states that all senators and representatives owe a duty\nof trust and confidence to the nation with respect to material, nonpublic\ninformation they obtain in the course of their official duties. Ethics rules already\nprohibited members of Congress to use information they gain as part of their\nofficial duties in order to make a private profit. However, although the Stock\nAct provides for fines, there are no criminal penalties. Although theoretically\nit is illegal for members of Congress to trade based on non-public information\ngathered during their official duties, neither the SEC nor the Justice\nDepartment has ever prosecuted a lawmaker for trading on government\ninformation.<\/p>\n\n\n\n

A new federal law\nprohibiting lawmakers from owning stocks in individual companies would stop trading\nin any company in which the lawmaker had insider information. A more\nexpansive law could prohibit any stock trading (public or private company,\nstock or fund), in an account owned by the member of Congress, their families,\nor any trust in which they have an interest, while that person is serving in\nCongress. This would prevent members of Congress (regardless of political\nparty) from trading on material, nonpublic information that the public does not\nhave. It would also avoid any sense of impropriety and any conflict of\ninterest. After all, Congress should be acting in the best interests of the\nAmerican public \u2013 not their own. <\/p>\n\n\n\n

Exactly what\nconstitutes insider trading can be murky, and proving insider trading can be an\nexpensive, time consuming endeavor that essentially would be paid for by\ntaxpayers. The Stock Act of 2012 was a good first step, but clearly it did not\ngo far enough to end questionable stock trading by Congressional members. Both\nthe Senate and House have rules on financial disclosure for members.\nUnfortunately, financial disclosure does not prevent dubious securities\ntransactions. Congressional members having inside information on companies or\nlikely economic events can conduct profitable stock transactions that are at\nthe very least a potential conflict of interest. Of course, the challenge to\nnew regulation on stock transactions for Congress to prevent conflicts of\ninterest and any wrongdoing – Congress would have to pass the legislation and lose\nthe opportunity to profit from such transactions. <\/p>\n\n\n\n

For further information:<\/p>\n\n\n\n