The STOCK Act: a Poor Attempt to Ease Gridlock
In President Obama’s State of the Union address, he called on Congress to pass several reforms aimed at easing gridlock in Congress, including a ban on insider trading by members of Congress. Congress seemed to answer his call when both houses pushed through versions of the STOCK (Stop Trading on Congressional Knowledge) Act, now in reconciliation.
Don't be fooled. This bill is at best, barely effective, and at worse, fueling gridlock by allowing Congress to ignore more pressing issues of capital corruption in politics. So let’s be clear.
What the STOCK Act does do:
- Clearly defines the fiduciary responsibility (duty by law) of Congress as it relates to the financial markets. (although it’s been argued that Congress already has this fiduciary responsibility).
What the STOCK Act does NOT do:
- Allow members of Congress to be prosecuted for trading off of nonpublic information.
- Prohibit investor trading using nonpublic information collected from “political intelligence”
Who cares about conflict of interest if you can’t be prosecuted anyway? The “speech or debate” clause protects all Congress members from persecution for prospective legislative activities. The SEC currently assumes insider trading information would fall under this protection. Congratulations Congress…you’re creating a Congressional rule that members of Congress are exempt from!
But at least we’ve stopped investors from paying political intelligence firms for nonpublic information right? Wrong. The bill would only require these firms to disclose general details concerning their intelligence. Plus, the SEC already prohibits any person who has a fiduciary responsibility from engaging in insider trading using nonpublic information. So any fund engaging in these activities Would Have Already Been Prosecuted under current law! Congratulations again Congress, it takes skill to make law that is already a law…
Although it looks great on paper, this act accomplishes very little with respect to Congressional accountability. It certainly does not bode well for our political system when Congress must resort to mere illusions of bipartisanship to satisfy the American people.