Two days after the US Senate votes 92 to 2 to take up a measure that would ban Congressional members from engaging in insider trading, the legislation has passed by a 96 to 3 vote. The bill, which bars members of Congress from using confidential information obtained as a result of being in public office to trade stock, had temporarily become entangled in the proposals of over two dozen amendments, with some of the amendments seeking to strengthen the bill and others looking to weaken it.
One of the amendments that passed by a 58-41 vote would extend the new rules of the bill to cover members of the executive branch. Per the bill, Congressional members, senior administration officials, and top aides would have 30 days instead of a year to disclose financial transactions.
President Barack Obama is a supporter of the Stop Trading on Congressional Knowledge (STOCK) Act. During his State of the Union address last month, he said that if Congress placed their signatures of approval on the bill he would sign it into law right away. There is currently a companion bill making its way through the House that has over 255 co-sponsors and still must be put to a vote.
Authored by Senators Scott Brown (R-Mass.) and Kirsten Gillibrand (D-N.Y.), the STOCK Act is derived from two bills authored respectively by both of them. It was Senate Homeland Security and Government Reform Committee Chairman Joe Lieberman (I-Ct.) that combined the two bills.
Originally introduced in 2006, the STOCK Act started to generate a lot more interest from lawmakers after the CBS news program 60 minutes reported that members of Congress bought stock in companies while debating on laws that could impact the businesses. These investments were not illegal.
Other provisions of the combined bill include making it illegal for Congress members to tip off others, which would become a crime and a violation of congressional rules. However, the bill does not ban lawmakers from doing political favors for companies that they have stock in as long as they don’t actually sell the stock.
As our securities fraud law firm mentioned in an earlier blog post, the Securities and Exchange Commission grew worried that placing this kind of insider trading ban on lawmakers affect the scope of existing laws. The SEC instead wanted there to be a fiduciary duty barring members of Congress from revealing confidential information and using what they know for personal gain.
The use of confidential insider information to make a trading profit is wrong—even if some consider it a victimless crime.
As Congress moves on insider trading bill, lawmakers remain exempt from several federal laws, Washington Post/Associated Press, February 2, 2012
Lure of a Senate Bill Attracts Amendments, Some of Them Relevant, The New York Times, February 1, 2012
STOCK Act: Insider Trading Bill To Receive Senate Vote Next Week, Huffington Post, January 26, 2012
More Blog Posts:
Insider Trading: Former FrontPoint Partners Hedge Fund Manager Pleads Guilty to Criminal Charges, Institutional Investors Securities Blog, August 20, 2011
Ex-Goldman Sachs Board Member Accused of Insider Trading with Galleon Group Co-Founder Seeks to Have SEC Administrative Case Against Him Dropped, Institutional Investors Securities Blog, April 19, 2011
$78M Insider Trading Scam: “Operation Perfect Hedge” Leads to Criminal Charges for Seven Financial Industry Professionals, Stockbroker Fraud Blog, January 18, 2012
Measure Banning Insider Trading Gains Support of Congress Members, Stockbroker Fraud Blog, September 24, 2011
That said, our stockbroker fraud law firm are familiar with many investors who are direct victims of financial misconduct. We consider it our responsibility to help them recoup their losses through arbitration and in court. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.