Insider Trading by Members of Congress
BY: Tyler Bial, RBFL Student Editor
With the ever-increasing polarization of American politics, both sides of the aisle have amplified their calls to restrict congressional insider trading in recent years. While Congress passed the STOCK Act in 2012 as an attempt to combat congressional insider trading, the STOCK Act is widely regarded as a failed solution that is in desperate need of an overhaul. Nevertheless, despite these renewed calls for reform, Congress has resisted imposing restrictions on itself.
Both Democrat and Republican officials, among others, claim the failure to reform this area of law is likely due to the fact that any passed reform would be to each elected Congressman’s personal detriment. Despite holding a majority in both the House of Representatives and the Senate from 2020-2022, Democrats elected not to push through legislation that would overhaul the STOCK Act and address congressional insider trading. Democrat leaders claimed this was a tactical move, intended to ensure that any reform is done the right way so as to not be a repeat of the STOCK Act’s failing. Several Republican officials (as well as many officials inside the Democratic party) claim instead that Democrats chose not to pass legislation of this sort, despite bipartisan support, based on their personal interests to the contrary. While the Democrats did not see the “Red Wave” that was forecasted in the 2022 elections, their success in the midterms does not necessarily solve the wonder of why the party would pass up a chance to accomplish meaningful reform that they could champion in future elections. Despite the lack of indictment on Democrat leadership for their failure to reform congressional insider trading laws, reform remains highly popular among both party’s constituents. Thus, many believe the Democrats missed a free opportunity to gain points with voters on a heavily scrutinized issue based on their own conflicts.
Although a majority of Americans wish to see reform that addresses congressional insider trading, and despite the vocal bipartisan support for such reform, both the Republican and Democrat parties have elected officials who are likely to oppose reform. Thus, resistance to congressional insider trading laws is likely to persist in the future, regardless of which party is in control. This leaves open the question of whether meaningful reform will eventually be passed, or whether Congress will refuse to put forth self-regulating legislation that serves to their personal detriment. While the calls for congressional insider reform are likely to grow louder the longer that Congress fails to address the issue, the fact remains that there is a likelihood that Congress simply fails to regulate itself, despite the bipartisan support for such regulation.
Sources:
Sana Mesiya, Failures of the STOCK Act and the Future of Congressional Insider Trader Reform, 58 Am. Crim. L. Rev. Online 92, 98 (2021).
Alicia Parlapiano, Adam Playford & Kate Kelly, These 97 Members of Congress
Reported Trades in Companies Influenced by Their Committees, N.Y. Times (Sept. 13, 2022), https://www.nytimes.com/interactive/2022/09/13/us/politics/congress-members-stock-trading-list.html/.
Rebecca Ballhaus et al., As Covid Hit, Washington Officials Traded Stocks with Exquisite Timing, Wall St. J. (Oct. 19, 2022), https://www.wsj.com/articles/covid-washington-officials-stocks-trading-markets-stimulus-11666192404.
Stephanie Lai & Kate Kelly, House Puts Off Vote to Limit Lawmakers’ Stock Trades, Casting Doubt on Prospects, N.Y. Times (last updated Oct. 3, 2022), https://www.nytimes.com/2022/09/30/us/politics/stock-trading-vote-congress.html.
James Downie, Opinion, If Dems Can’t Even Use Their Majority for This No-Brainer, What’s the Point of Having It, MSNBC (last updated Oct. 3, 2022), https://www.msnbc.com/opinion/msnbc-opinion/democrats-botched-stock-trading-ban-huge-missed-chance-n1299215.