Insider trading is illegal, even for members of Congress. Existing white collar crime laws likely already included members of Congress, but the Senate acted to make that clear this week by passing the Stop Trading on Congressional Knowledge (STOCK) Act. The act passed after a 96 to 3 vote, making it almost a sure thing to get through the U.S. House of Representatives. If passed, it will ensure that the same rules that prevent private citizens from acting on insider information apply to members of Congress and the executive branch.
The investment community has come under intense scrutiny in recent months. The treacherous economy and a string of unfavorable headlines have turned public opinion against people in the banking, money management and investment fields. At the same time, public approval of Congress and the efforts of that institution are near record lows. The Act may be an effort to disassociate Congress from Wall Street, a pairing that many people have been led to believe is behind the current economic downturn.
The move by Congress signals a continuation of efforts to cast the blame for economic woes on Wall Street. Federal prosecutors are expending tremendous resources to target those suspected of Medicare fraud, mortgage fraud, insider trading and other white collar crimes. Executives and professionals working in these industries face increased pressure of criminal prosecution.
Voters may or may not be comforted by the passage of an Act that confirms something which was likely already true. For the individual traders and executives at companies in the industry, this move is just another sign that the government wants to be seen as your enemy, not your friend. If you or your company comes under investigation, you need to be prepared to aggressively assert your rights in court.
Source: CNN, "Senate passes insider-trading bill," by Ted Barrett, 2 February 2012