Congress members legally can trade stocks based on non-public information

[DreamSmoker]

Congress members legally can trade stocks based on non-public information they get in the course of their job – and some apparently make a piles of money from the practice, “60 Minutes” reported in its lead segment Sunday.

Today legislation was introduced to halt such trading, although such efforts have gone no where in the past.

A basic example of the practice is where a Congress member knows a big government contract is about to be awarded and buys stock in the company. But there are numerous variations.

Congress and the Supreme Court are the only federal agencies in which there are no restrictions regarding stock transactions spurred by non-public information. Bills introduced to block this – typically requiring Congress members to put their investments in a blind trust – but have never garnered more than 14 congressional sponsors.

http://totalbuzz.ocregister.com/2011/11/15/congress-members-insider-trading-attacked/77213/

[Brickbat]

1. Having worked at a job that dealt with careful timing of releasing information that would affect

stock prices, I have to say I'm truly shocked that I knew nothing of this. It's truly an outrage.

[RKP5637]

2. Just part of the perks along with bribes and an endless stream of jobs via the

revolving doors. Makes one really proud of how congress operates. I give them a 3% approval rating and IMO that's pretty damn generous.

[Angry Dragon]

3. It has been pointed out that is false

[MADem]

4. It's not "insider trading" if you act before the law is passed and the President signs it.

AND if you're not getting the information from the corporation. AND if you can say "Well, hell, I didn't know the law would pass, or the President would sign it."

There is a LOT of wiggle room for Congress with this definition, and that is why the STOCK ACT needs passing.

Insider trading is, per the SEC (this is from a government website, the four paragraph rule does not apply because this is a public document):

"Insider trading" is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders—officers, directors, and employees—buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC. For more information about this type of insider trading and the reports insiders must file, please read "Forms 3, 4, 5" in our Fast Answers databank.

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Examples of insider trading cases that have been brought by the SEC are cases against:

Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;
Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;
Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;
Government employees who learned of such information because of their employment by the government; and
Other persons who misappropriated, and took advantage of, confidential information from their employers.
Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.

The SEC adopted new Rules 10b5-1 and 10b5-2 to resolve two insider trading issues where the courts have disagreed. Rule 10b5-1 provides that a person trades on the basis of material nonpublic information if a trader is "aware" of the material nonpublic information when making the purchase or sale. The rule also sets forth several affirmative defenses or exceptions to liability. The rule permits persons to trade in certain specified circumstances where it is clear that the information they are aware of is not a factor in the decision to trade, such as pursuant to a pre-existing plan, contract, or instruction that was made in good faith.

Rule 10b5-2 clarifies how the misappropriation theory applies to certain non-business relationships. This rule provides that a person receiving confidential information under circumstances specified in the rule would owe a duty of trust or confidence and thus could be liable under the misappropriation theory.

For more information about insider trading, please read Insider Trading—A U.S. Perspective, a speech by staff of the SEC.

http://www.sec.gov/answers/insider.htm

[Angry Dragon]

6. If you are in possession of information that is not in the public domain

and trade on that information that is insider information
no matter who you are.

There is no law that exempts congress from being tried on insider trading

[MADem]

7. It's in the public domain, though. No one pays attention.

Those committee meetings aren't secret...they're just BORING.

Bills prepared for a vote aren't secret--they're just dull.

And until a bill becomes law, it ain't shit. It's just a handful of hope.

And the Constitution would prevent the arrest of a legislator during the period of time when the legislature is in session, particularly for a misdemeanor, which Insider Trading is.

hey shall in all Cases, except Treason, Felony and Breach of the Peace, be privileged from Arrest during their Attendance at the Session of their respective Houses, and in going to and returning from the same; and for any Speech or Debate in either House, they shall not be questioned in any other Place.

Who'd arrest 'em, even if they could? The Capitol Police? I think not. The DC police? Not while they're in session, and probably not "going to and from" their districts, either--who appropriates the salaries of all the government officials in DC? Why, Congress does.

The Stock Act needs to be passed if we want this crap to cease. I think it's a good effort for OWS to pursue.

[DreamSmoker]

5. ' report a 'smear'???

Washington -- House Minority Leader Nancy Pelosi's office accused the news program "60 Minutes" of omitting key information from its report Sunday on how members of Congress use privileged information to profit from stock trades.

Pelosi spokesman Drew Hammill also called the report "a right-wing smear" based on a new book by conservative author Peter Schweizer of the Hoover Institution, a think tank based at Stanford University. The book is titled: "Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Jail."

Pelosi, a San Francisco Democrat, was highlighted in the report along with House Speaker John Boehner, R-Ohio, and House Financial Services Committee Chairman Spencer Bachus, R-Ala., among others.

A bill by Rep. Louise Slaughter, D-N.Y., called the Stop Trading on Congressional Knowledge Act, or STOCK, would ban congressional insider trading. It had just nine sponsors until Monday, when nine more joined, none from California.


http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/14/MNIV1LUUBG.DTL#ixzz1dpAAq2wm

[MADem]

8. Yeah--it talks about a bill a Democrat has been trying to get passed for half a decade.

This thing is a smear all right--it's a shit smear on the profit sheets of everyone in Congress, left, right and center.

I'm sorry, Nancy, and Bonehead, and anyone else who is making money hand over fist as a consequence of cozy relations with lobbyists--it's time for the gravy train to pull into the station and be scrapped. We need this nonsense to cease.