Murky Signals for Congress on Insider Trading - H.R. 1148
From the NYTimes blog article:
The political problem is that the S.E.C., which takes the lead in most investigations, must obtain its appropriations from Congress
A member of Congress would certainly violate the law if that person learned about a pending corporate transaction, say a merger, and then traded on it before the information became public. When the information concerns legislative developments that can affect a company or an industry, determining whether it is “material” becomes more difficult because it is not always clear how one step in the legislative process may affect the stock market.
But that does not mean Congress is somehow immune from being charged with insider trading. Donna M. Nagy, a professor at the Indiana University Maurer School of Law, published a paper this year arguing that the purported exemption for Capitol Hill misapprehends the scope of the insider trading prohibition.
Regardless of whether Congress is covered by the current law, the proposed legislation, called the Stop Trading on Congressional Knowledge Act, would make it clear that trading on legislative information is a form of securities fraud, removing any doubt about whether it could be applied to lawmakers and their staff. The proposed law has been around for years, and I testified about an earlier version of the bill in July 2009.
But there was no movement on the legislation until “60 Minutes” on CBS brought broad public attention on the issue earlier this month.
Passage of the legislation is unlikely to result in new insider trading cases involving Capitol Hill because of two significant hurdles to pursuing investigations of members of Congress and their staff.