Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


12:58 PM
Justin Grant
Justin Grant
Connect Directly

Congressional Insider Trading Ban May Become Law This Year

Considering some of the comments made by Republicans and Democrats following President Obama's address to the nation, it appears lawmakers are prepared to outlaw this unethical practice, even as Washington remains gridlocked on most other issues.

Any attempts by President Barack Obama to pass bills that would boost federal spending on the nation's infrastructure, or raise taxes on millionaires, are likely to be thwarted by an intransigent opposition ahead of November's election.

But there's one piece of the legislation the embattled president could push through with support from both sides of the aisle: a ban on congressional insider trading. In Tuesday's State of the Union Address, President Obama implored lawmakers to send him a bill that would ban insider trading by members of Congress.

"I will sign it tomorrow," Obama said. "Let's limit any elected official from owning stocks in industries they impact."

Obama's comments have breathed new life into the STOCK Act, a bill introduced in 2006 that would ban legislators and their aides from making investments off information that's not available to the public.

The issue was thrust back into the public consciousness last year after a study published in the academic journal Business and Politics found that a portfolio mimicking the stock purchases of U.S. House members beat the stock market by a substantial margin.

The study was based on an analysis of more than 16,000 stock trades made by nearly 300 House delegates over a 16-year period. Separate research found U.S. Senators performed even better than their House colleagues, noting this was likely because they had even better information on when to cash in their shares.

Four months after Advanced Trading reported on this issue , 60 Minutes aired a report showing how Nancy Pelosi, John Boehner and Spencer Bachus based some of their investment decisions on inside information, an act that would get an average taxpayer thrown in jail.

During its own investigation nearly two years ago, the Wall Street Journal discovered that congressional aides were also making money off a loophole that allowed their superiors to buy and sell stocks with insider information. The paper said 72 aides from both parties traded stocks within industries legislated by their superiors.

But considering some of the comments made by Republicans and Democrats following Obama's address to the nation, it appears lawmakers are prepared to outlaw this unethical practice, even as Washington remains gridlocked on most other issues. Huffington Post's Ryan Grim reported that Senate Majority Leader Harry Reid (D-Nev.) said he doesn't see why a ban shouldn't become law this year. Grim added that Sen. Susan Collins (R-Maine) said she hopes Reid schedules this bill for potential action. Even Sen. John Cornyn (R-Texas) expressed support for a ban, telling Grim, "I hope he brings it to the floor. I don't see a lot of controversy there."

Meanwhile Politico reported that Sen. Scott Brown (R-Mass), the bill's lead sponsor, told President Obama, "my insider trading bill is on Harry's desk right now. Tell him to get it out."

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio
More Commentary
A Wild Ride Comes to an End
Covering the financial services technology space for the past 15 years has been a thrilling ride with many ups as downs.
The End of an Era: Farewell to an Icon
After more than two decades of writing for Wall Street & Technology, I am leaving the media brand. It's time to reflect on our mutual history and the road ahead.
Beyond Bitcoin: Why Counterparty Has Won Support From Overstock's Chairman
The combined excitement over the currency and the Blockchain has kept the market capitalization above $4 billion for more than a year. This has attracted both imitators and innovators.
Asset Managers Set Sights on Defragmenting Back-Office Data
Defragmenting back-office data and technology will be a top focus for asset managers in 2015.
4 Mobile Security Predictions for 2015
As we look ahead, mobility is the perfect breeding ground for attacks in 2015.
Register for Wall Street & Technology Newsletters
Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.