STOCK Act to Stop Congressional Insider Trading Passes Key Vote in Senate
In a bipartisan vote on Jan. 30, 2012, the US Senate voted 93 to 2 to proceed with debate on the Stop Trading On Congressional Knowledge (STOCK) Act, a bill targeting alleged insider trading by members of Congress.
The legislation would prohibit members of Congress, employees of Congress, and all federal employees from using “any nonpublic information derived from the individual’s position as a Member of Congress or employee of Congress, or gained from performance of the individual’s duties, for personal benefit.” The STOCK Act would also require greater oversight of the growing “political intelligence” industry, and would require every member of Congress to publicly file and disclose any financial transaction of stocks, bonds, and other securities within 30 days on their websites.
A Dec. 2004 study in the Journal of Financial and Quantitative Analysis revealed that US Senators’ stock trades performed 12.3% better than the market average, and 6% better for members of the US House according to a May 2011 study in Business and Politics. No arrests or prosecutions have ever been made against members of Congress for insider trading based on nonpublic congressional knowledge.
“Members of Congress and their staffers have the duty to the American people,” Senate Majority Leader Harry Reid said on the Senate floor on Jan. 30, 2012. “They may not use privileged information they get on the job to personally profit, but the perception remains that a few members of Congress are using their positions as public servants to serve themselves instead… The STOCK Act will clear up any perception that it’s acceptable for members of Congress to profit from insider trading.”
Senators Richard Burr (R-NC) and Tom Coburn (R-OK) voted against the bill. In a statement following the vote, Senator Burr said “There are already laws in place to address this critical issue. Laws regarding insider trading that apply to the American people also apply to members of Congress and their staff.”
The STOCK Act was introduced three times in the US House of Representative from 2006-2009, each time dying in committee. On Nov. 13, 2011, 60 Minutes reported that several members of Congress, including House Speaker John Boehner (R-OH) and former Speaker Nancy Pelosi (D-CA), allegedly used insider information for personal gain. The STOCK Act received 84 additional House co-sponsors in the five days following the report, and two versions were filed in the Senate within the next four days.
In his State of the Union Address on Jan. 24, 2012, President Obama said “Send me a bill that bans insider trading by members of Congress, and I will sign it tomorrow.”
A spokesperson for US House of Representatives Majority Leader Eric Cantor said that lawmakers will propose their version of the STOCK Act by the end of February.
UPDATE: On Feb. 2, 2012, a revised version of the STOCK Act passed in the Senate by a vote of 96-3 with Senators Richard Burr (R-NC), Tom Coburn (R-OK), and Jeff Bingaman (D-NM) dissenting.
Seung Min Kim, “Senate Votes to Move Stock Act,” politico.com, Jan. 30, 2012
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