Could New Insider Trading Law Make the Practice Worse?
by Wynton Hall
Yes, says Yale Law Professor Jonathan Macey in an article in today’s Wall Street Journal.
From WSJ:
On closer examination, it appears that what Congress really wants is to keep making the big bucks that come from trading on inside information but to trick those outside of the Beltway into believing they are doing something about this corruption. For one thing, the rules proposed for Capitol Hill are not like those that apply to the rest of us. Ours are so broad and vague that prosecutors enjoy almost unfettered discretion in deciding when and whom to prosecute.
Congress’s rules would be clear and precise. And not too broad; in fact they are too narrow. For example, the proposed rules in the Stock bill are directed only at information related to pending legislation. It would appear that inside information obtained by a congressman during a regulatory briefing, or in another context unrelated to pending legislation, would not be covered.
Professor Macey believes that the way to remedy the problem is to clearly define the parameters of what is and isn’t considered insider trading and to then apply the rules universally. Failure to do this, writes Macey, will mean that:
If the law passes in its current form, insider trading by Congress will not become illegal. I predict such trading will increase because the rules of the game will be clearer. Most significantly, the rule proposed for Congress would not involve the same murky inquiry into whether a trader owed or breached a “fiduciary duty” to the source of the information that required that he refrain from trading.
Professor Macey’s commentary comes a day after former Alaska Gov. Sarah Palin outlined additional deficiencies in the proposed legislation before offering her four-part solution to end congressional insider trading.
No response yet from lawmakers on Macey’s critique or Palin’s proposal.
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41 Comments
Why is this insider trading by our congressional leaders not a crime? If it would be normal people like you and I we would be led off in orange jump suits and hand cuffs.
This is what you get when the foxes write the rules for guarding the hen house. The real solution isn't more rules, but to start defanging the foxes. (I think that analogy works)
Congress has been elected to do a job – to represent their constituents. NOT their pockets, lobbyists, etc.
That said, the solution, IMO: Congress may not own any stock or invest while being a sitting member.
Nor shall their spouses or relatives – with full IRS disclosure for all on an annual basis. Their Salaries,
perks and pensions should be aplenty while being a Public Servant.
It's the same kind of "We're doing something about it" trick our phony congressmen ran against Americans with the McCain Feingold law.
No doubt the bills will have dozens of pages most members will never read…and in there will be loopholes and exceptions!
Conservatives tend to understand the bait and switch Washington practices–but the libs I know say "they" are trying! And willingly accept what comes at face value just as soon as the MSM whispers, "these are progressive laws that will…."
the only HONEST application would be to make all sitting members of congress put all of their finances in a blind trust.
You know, Rick Perry's idea of a part time congress- WITH part time pay and benefits- sounds better each and every day…
Of course! The boss will never fire or discipline himself.
This is bread and circuses.
Either congress follows the same rules as the rest of us or they can all take a different job.
Jeez, at least if you pay a hooker, you had a good time. We don't even get that with Congress.
I'm shocked.
I'm so sick and tired of DC I beleive it's time to blow the whole friggin thing up and start over. There is no fixing it.
Wynton's right. It's always better to do nothing. That was no one can criticize you.
Helen, you don't mind me calling you Helen, do you Helen dear?
http://uglydemocrats.com/democrats/United-States/...
Why not stick to something you do know about?
Start a blog on drinking.
I can talk to any issue on this list my good friend. One of my gifts.
And you other gift, is it a 2 galling box of wine?
What's a galling?
That's gallon spelled in 'drunk' so you'd understand it Helen.
Thanks. You've been a really good pen pal.
Do nothing?
Are you referring to Pelosi when she postponed the vote on the credit card reform bill so her stock in VISA would continue to skyrocket?
Or are you referring to the Dems not passing a budget in nearly 3 years?
Are you referring to Obama doing nothing to push through the pipeline between Alaska and Texas that would reduce our dependance on foreign oil and create thousands of jobs?
Are you referring to the Dems doing NOTHING to reduce spending in this country and balance the budget?
Or are you referring to Obama's moratorium on deep drilling in the Gulf Coast which put thousands of people out of work?
I know, you are referring to Obama doing NOTHING to get back our drone!!!
Helen, you're still just an angry old ugly drunk.
You don't mind me calling you Helen, do you Helen dear? http://uglydemocrats.com/democrats/United-States/...
This would be par for the coarse in Washington. We have enough laws on this already, they just need people not afraid to enforce them.
Lots of case law on insider trading. Past ones are what shape current law, and they are all over the place. Some more clear cut, than others. Pretty entertaining reading. I don't think public officials are easy to prosecute because the arguement is that the information is "public" because it made it into their hands. And, like the article more or less states, no duty is created by the tipper, to the tippee, etc.
How utopian would be in this day and age to suggest they should construct and abide by ethics rules? It shouldn't even come to an application of law for public officials. Disgrace them, and dismiss them.
Smells like Dodd Frank
Simple!
"No Congressperson or Representative shall vote on any Legislation or funding that He/She (or their spouses) has any financial interests in whatsoever"
That was easy…..and cheap too!
Wow, your solution is bizarre. You're okay if your uncle becomes a congressman and you, as a career broker (for instance) or with a lot of your retirement tied in stocks (for another instance) would be required to sell before he takes office?
Talk about draconian.
How about keeping congress out of issues that would need them to hear privileged information in the first place?
Not simple. A portfolio may be varied, not just in companies, but in funds that are diversified in many companies. You could make sure none of your stock was in company X, but maybe your whole life insurance provider put part of your balance into them, or maybe company X buys the company you are invested in.
A blind trust is a good solution. Or just to get out of the stock market. There are 100's of other good ways to speculate with your money.
Your last sentence is bizarre – we've tried that and they continue to insist they know better than you or anyone else.
My solution would require someone with commitment, honesty, integrity who really wants to serve their country. There are a lot of peeps who cannot afford to run for office who would make for a much better, saner, ethical Congressman than the friggin' bunch we have now, IMO.
The reason for insider trading laws is to make the rubes feel safe when buying stocks. Abolish the laws and replace it with one rule – all stock brokers must post a sign on their door saying "Caveat Emptor. Remember, we make money whether or not you do."
This is like Gresham's Law for protection. Bad protection drives out good. The only real protection that an investor has is ability to evaluate the integrity of the executives of the companies that are being sold. If you're not willing to work at it then prepare to be fleeced. If you think that there are people that know more than you about a particular company and would take advantage of your relative ignorance, then don't invest.
The market will develop its own protection methods but it can't so long as people are stupid enough to think that the government is protecting them now.
Actually it is better for congress to do nothing just as long as it also involves not spending money.
In fact I would be in favor of bribing congress to just sit and play xbox all day and stay out of our lives.
I don't know duh…you refuse to pay congress people and the only folks that will apply for the job will be retirees and those of the leisure class. But not a bad idea to outlaw market trades by sitting members of congress.
Congress is already a part time job. The majority of their work day is spent raising money to get reelected.
Careful what you wish for mex. Blow up the system and they are likely to take some things with them that you can't live without…. like your home, savings and investments.
Beauty is in the eye of the beholder Ro… the little mrs may be ugly as a stump but you don't even notice when the lights are out. That's what I like most about you. You're a dedicated family man.
ya mean like they already did?
Sure, leave them alone and markets will just regulate themselves. Nothing to see here… move along.
That worked so well for us in the Great Depression and then again in 2008.
Sorry to hear you are not doing well. Fortunately for you, you live in the greatest country in the world and there is always hope if you're willing to work hard.
Better luck in the future.
Congress is writing a law to regulate itself. I won't even have to read it. It will be 100% ineffective.
And it's a great country in spite of people like you Helen.
So, did you sign for the Walker recall in Wi 10-20 times yet?
Oh, what am I saying. You'd have to hit every liquor store between that texas area you live in and the id west. that would be an expensive trip for you.
Free market adjustments. The most natural thing in the world Helen.
You don't mind me calling you Helen do you dear?
http://uglydemocrats.com/democrats/United-States/...
Oh Helen, you don't really mind me calling you Helen do you?
You're ugly from the inside, a deep down ugly.
The outside fat and wrinkles just don't hold a candle to your inner ugly Helen.
And the lights out can't hide that kind of ugly. http://uglydemocrats.com/democrats/United-States/...
Helen, you are just not drunk enough to make sense. Open another 4-5 bottles then come back when you're steadier and not shaking so hard.
Greed is the problem, so we need to make it less rewarding for the greedy. Enforcing current laws as though these are just people that are crooks would be a good place to start.
But since your leader the dictator obama has corrupted the justice dept, I don't see that happening.
Cronies always win when government is involved.
It's not luck, it determination, perseverance, sweat, risk, independence, and less regulation on my life. Luck? What does luck have to do with it?
Sorry, if my Uncle, decides to run for office it should not mean that I have to refrain from taking part int the markets. Screw your idiotic proposal.
The simple solution would be to amend the constitution to read "Congress shall make no law which does not apply all to citizens equally, and congress shall not be permitted to exclude itself from any law which applies to all citizens equally"
Now all the laws, and rules will apply to them that they make for us, They would be subject to Obamacare, insider trading laws, et al.
Not even the courtesy of a reach around or a peck on the cheek.
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