March 4, 2009
Reform Groups Urge Congress to Prohibit ‘Congressional Insider Trading’
Reps. Baird, Slaughter and Walz Sponsor ‘Stop Trading on Congressional Knowledge Act’
WASHINGTON, D.C. – Several reform groups today urged Congress to adopt the “Stop Trading on Congressional Knowledge Act” (H.R. 682). The measure, sponsored by Reps. Brian Bair (D-Wash.), Louise McIntosh Slaughter (D-N.Y.) and Tim Walz (D-Minn.), would prohibit members of Congress, congressional staff and other federal employees from using non-public information for insider trading in the stock markets.
The organizations supporting the legislation include Common Cause, Democracy 21, League of Women Voters, Public Citizen and U.S. PIRG. The groups expressed surprise that congressional insider trading is not already illegal. As the letter observes:
“The Securities and Exchange Commission (SEC) does not have the authority to hold employees of Congress or the Executive Branch liable for using non-public information gained from official proceedings for insider trading. Under current law, ‘insider trading’ is defined as the buying or selling of securities or commodities based on non-public information in violation of confidentiality – either to the issuing company or the source of information. Most federal officials and employees do not owe a duty of confidentiality to the federal government and thus are not liable for insider trading.”
Currently, members of Congress, their staff and other federal employees may obtain non-public information in the course of their official duties that sheds light on inside information on the stocks and commodities markets and use that information for personal gain. There is growing concern that lobbyists and “political intelligence consultants” may also be trying to cash in on knowledge gained from federal officials and their staffs about the stock markets.
Consequently, the groups call for banning congressional insider trading and greater scrutiny of “political intelligence consultants” who cultivate staff connections in order to get information that can be used to take advantage of the markets. According to the letter:
“The legislation would prohibit members of Congress, congressional staff and other federal employees from using non-public information obtained through their official duties for personal gain in the stocks and commodities markets. It would also prohibit private individuals and firms who attempt to mine such information from public officials to use it for insider trading.”
The legislation is needed because of the federal government’s greater role in overseeing the financial services industry, which increases the risk that federal employees will use their insider knowledge of legislation, rules and even business trends to profit from the trading markets, the letter says.
To read the letter, go to http://www.citizen.org/congress/govt_reform/ethics/articles.cfm?ID=18423.