Should Politicians Trade Stocks? Congressional Insider Trading


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Insider trading, or the act of buying or selling investments based on nonpublic information, is against the law in the United States and in most countries. At its core, insider trading benefits well connected investors at the expense of the general public and it has been illegal in the US since 1934 – at least for corporate insiders. I made a video a few months ago on the biggest insider trading scandals, and a lot you asked in the comments section “what about politicians”?
The STOCK act was passed in the wake of some controversies over stock trades around the financial crisis of 2007-2008. Its purpose was to stop members of Congress from using non-public information derived from their official positions for personal benefit.
In March of last year four U.S. senators (Kelly Loeffler, Dianna Feinstein, James Inhofe & Richard Burr) were accused of using insider information about the coronavirus pandemic to profit in the stock market. They dumped their stock holdings, including investments in travel companies, while telling the public to remain calm there was nothing to worry about. All four senators denied wrongdoing, insisting that they acted on public information and news reports and not on non-public information that they had received at senators-only briefings. The Senate Ethics Committee and the department of justice, looked into the matter eventually dropping all investigations without finding any wrongdoing.
Are things likely to change? Well, a bipartisan group of lawmakers have introduced a bill called the Ban Conflicted Trading Act banning members of Congress and senior staff from buying and selling stocks, most bonds and options contracts. This is intended to prevent lawmakers and high-level staffers from enriching themselves through trades based on potentially market-moving information.
Should Politicians Trade? What should be done about Congressional Insider Trading?
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