Elected officials are prohibited from profiting on insider information by law known as the STOCK ACT.
There are strict penalties for regular citizens who violate insider trading laws but I haven’t found anything on the net stating that seantors or Representatives are subject to any actual punishment for breaking the law.
This might be another one of their laws written to sound good to the public but do nothing at all to ensure they are treated the same as regular citizens who violate the law.
STOCK ACT
The Stop Trading on Congressional Knowledge (STOCK) Act (Pub.L. 112–105, S. 2038, 126 Stat. 291, enacted April 4, 2012) is an Act of Congress designed to combat insider trading. It was signed into law on April 4, 2012.
The law prohibits the use of non-public information for private profit, including insider trading by members of Congress and other government employees.
The bill was passed in the Senate by a 96–3 vote.
Later the House of Representatives passed it by a 417–2 vote.
According to the current United States Senate Select Committee on Ethics, “A member, officer, or employee of the Senate shall not receive any compensation, nor shall he permit any compensation to accrue to his beneficial interest from any source, the receipt or accrual of which would occur by virtue of influence improperly exerted from his position as a member, officer, or employee.”
Congress passed and President Obama signed, the Stop trading on confidential information (STOCK) Act, which made insider trading illegal for government officials. It was an important reform, which was unfortunately gutted a few months later by the same Congress and President, once the public spotlight moved on to other issues.
This is one of the many ways Congress lies to the public. They do something that ordinary citizens want, usually with great fanfare. Then they change the parts that taxpayers care about, with no publicity.
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Why Congressional Insider Trading Is Legal – and Potentially Profitable
By Samuel Taube
Originally posted July 22, 2017
congressional insider trading and the stock act
We Americans pride ourselves on building a system of government where no one is above the law – not even the lawmakers themselves. Except… well, sometimes they kind of are. As this week’s chart shows, congressmen have historically done a lot better in the stock market than the average American household has. This suspicious outperformance is made possible by the widespread and technically legal practice of congressional insider trading.
As our Income Expert Marc Lichtenfeld wrote a few years ago…
I know a nearly foolproof way of getting rich. It doesn’t involve signing up for one of The Oxford Club’s services, and it doesn’t require much risk because you already know the outcome. In fact, you’ll help decide it. One thing you can do to increase your net worth by 10-fold is get elected to Congress.
It’s easy to understand how our representatives and senators obtain valuable financial information. Congress makes decisions about economic policy, foreign relations, tax reform and other matters that directly affect the bottom lines of publicly traded companies.
But there are more interesting questions to be asked about this seedy phenomenon. How does Congress get away with insider trading? And how can you take advantage of this lucrative legal gray area?
Why Isn’t Congressional Insider Trading Illegal?
By the letter of the law, it is. In 2012, President Obama signed the Stop Trading on Congressional Knowledge (STOCK) Act.
This law sought to crack down on white-collar crime in Washington. Among other provisions, it instituted strict disclosure requirements for congressmen who were buying and selling securities.
At first, the law worked like a charm. The number of stock transactions made by congressmen plunged more than 50% from 2011 to 2012. Those who kept trading had to post their trades to a searchable online database.
But then, just a year after the STOCK Act was passed, Congress amended it in a quick procedural vote. Surprise, surprise – it got rid of the online disclosure requirement.
Today, in order to see the inner workings of your representative’s portfolio, you have to go down to the basement of the Cannon House Office Building in Washington, D.C., and ask for a printed file.
Technically, that file in a damp D.C. basement still constitutes a public disclosure. Thus, your congressman’s market-beating transactions are technically not insider trading.
https://investmentu.com/why-congressional-insider-trading-legal-profitable/
Members of Congress come across a lot of information in the course of their official duties. Can they use “insider information” to make a quick buck by buying and selling stock at opportune times?
The answer to this question is a resounding and unequivocal no. Statutory law forbids it, and even if it did, Congress has always had the constitutional power to discipline its Members.
In mid-November 2011, CBS’ 60 Minutes ran a story alleging that Members of Congress were using insider information to benefit on stock trades. The story provoked a furor among the public, leading to the enactment of the STOCK Act, which President Obama signed into law on April 4, 2012. The act had several effects, but the most notable was that it explicitly stated that Members and congressional employees “are not exempt from the insider trading prohibitions arising under the securities laws…” (§4(a)). Additionally, it amended the Securities Exchange Act of 1934, to specify each Member or employee “owes a duty” when in receipt of “material, nonpublic information” obtained as a result of their public office (§4(b)(2)).
Although the STOCK Act amended the Securities Exchange Act of 1934, in the lead up to its enactment, there was some debate over whether Members and staffers were exempt from anti-insider trading law. For instance, in February 2012, when the House passed the STOCK Act, Representative Rob Woodall of Georgia said, “The STOCK Act has been characterized … as to prevent insider trading by members of Congress, as if members of Congress are allowed to participate in insider trading today, and they are not.” Similarly, when the Senate passed the STOCK Act, The Wall Street Journal reported:
Robert Khuzami, head enforcement official at the Securities and Exchange Commission, said in testimony late last year that it is possible that insider-trading laws do, in fact, apply to members of Congress.
But he said it is possible that a federal judge could disagree with him and strike down an insider-trading case. As a result, he said it would be easier to prosecute an insider-trading case against a lawmaker if Congress approved legislation to make it clear that lawmakers have a duty to keep private the nonpublic information they hear in Congress about legislation and policy changes that could affect markets.
https://www.congressionalinstitute.org/2018/08/16/can-members-of-congress-engage-in-insider-trading/
Insider trading is the buying or selling of a publicly traded company’s stock by someone who has non-public, material information about that stock
Material information is any information that could substantially impact an investor’s decision to buy or sell the security. Non-public information is information that is not legally available to the public
Insider trading can be legal as long as it conforms to the rules set forth by the SEC
https://www.investopedia.com/terms/i/insidertrading.asp
...so when a CEO buys or sells stock, it is posted online. I always check that when I owned stock or thinking of buying.
But when they amended that requirement for congress that they have to disclose within 45 days in a basement, they basically made it legal again.
I read that at least one of the senators tipped their donors. Now that is illegal. But as with everything else I would never expect any justice to come of it.