In this previous post, I discussed the federal government’s newly aggressive enforcement of insider trading laws while federal government employees seemed to be providing tips to investors about pending government decisions that impact share prices of health care companies. In the corporate world, this is known as “tipping” material non-public information and has severe consequences. In the government world, “Congress and the executive branch — along with the reporters and lobbyists who track them — are accustomed to a relatively unfettered exchange of information, compared with the more regulated environment on Wall Street.”
This reminded me that in April 2013, Congress passed a bill striking down a key provision of the federal law prohibiting insider trading by members of Congress and their staff and high-level executive branch employees. It is amazing that this was not the law until 2012. However, the STOCK Act provided that securities transactions would be reported within 45 days and filed electronically so people could actually see it.
Congress voted to kill the broad disclosure provisions without hearings or public notice due to laughable national security and personal safety concerns. According to a report on the matter:
“Virtually all the cybersecurity, national security, and law enforcement experts interviewed during this study noted that making this information available in this fashion fundamentally transforms the ability (and the likelihood) of others — individuals, organizations, nation-states — to exploit that information for criminal, intelligence, and other purposes.”
In addition, several groups representing the interests of federal employees have criticized the law.
Let us not forget that directors, officers and holders of 10% or more of a public company must disclose transactions in that company’s stock:
- Publicly on EDGAR, and
- Within 2 business days of the transaction.
I guess those people don’t have the same security concerns as federal employees.
60 Minutes confronts John Boehner generally about insider trading rules for federal employees (at 2:08) and Nancy Pelosi specifically about her participation in the Visa IPO (at 3:00 and Pelosi’s hilarious response at 3:15).