Congressional Trading on Advance Info Not Illegal: SEC
July 15, 2011 by admin
Filed under News Stories
July 15th, 2011
CNBC.com
By: Eamon Javers
When you buy and sell stocks based on secrets you learned at the office, it could be insider trading.
But when a United States Senator does it, it’s probably perfectly legal.
That’s because the SEC has largely determined that trading stocks based on advance knowledge of action in Congress is not insider trading.
If anything, it’s “outsider” trading — buying and selling shares based on knowledge of an outside force that’s about to hit a company’s share value.
Think of it like a trader who sees a satellite image of a hurricane bearing down on an oil rig — and shorts the oil company’s stock in expectation of the damage.
Except in the case of Capitol Hill, the members of Congress can be both the trader and the hurricane — buying and selling shares in expectation of the effect that their own action has on the company’s stock price.
Some critics say that’s probably going on a lot on Capitol Hill — although they don’t have any direct proof.
“It’s really quite outrageous,” said Craig Holman, the legislative representative for Public Citizen. “If you just take a look at the statistics, members of Congress are either geniuses when it comes to stock trading or they are in fact trading off of some of this insider information.”
A pair of recent academic studies found that House members beat the market in their personal stock trading by about 6 percent, and Senators beat the market by about 10 percent.
In the 2011 study “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives,” four university professors found that a portfolio that mimics the purchases of House Members beats the market by 55 basis points per month, or approximately 6 percent annually. That study looked at 16,000 common stock transactions made by approximately 300 House delegates from 1985 to 2001.
“Overall we find that the common stocks purchased by Members of the U.S. House of Representatives earn statistically significant positive abnormal returns. Our results indicate that Representatives, like Senators, also trade with a substantial information advantage,” wrote the study’s authors, Alan J. Ziobrowski of Georgia State University, James W. Boyd, of Lindenwood University, Ping Cheng of Florida Atlantic University and Brigitte J. Ziobrowski of Augusta State University.
The group also noted that stocks purchased by Democrats outperform stocks purchased by Republicans.
The SEC generally does not view trading on the basis of advance knowledge of Congressional action to be insider trading. Both House and Senate ethics manuals say that members of Congress are not supposed to make any personal profit from confidential knowledge, although no member of Congress has ever been publicly sanctioned for such trading.
Critics of the loose rules say they can’t prove that members of Congress or their staffs are actually trading and profiting from their positions, but they still believe that’s the only explanation for the returns members of Congress generate over time.
“It just boggles the imagination to think that members of Congress are so much smarter than we are and other traders that they just for some reason enjoy a much higher rate of return on their stock investments than the rest of us,” said Holman. “I just don’t believe that.”
And once again this year, two Democrats have introduced legislation called the STOCK Act — or Stop Trading on Congressional Knowledge Act — that would prohibit such political speculation.
Under the measure, sponsored by Reps Louise Slaughter, D-N.Y., and Tim Walz, D-Minn., members of Congress, their staffs, and others in Washington would face a new set of legal prohibitions.
The proposal:
- Prohibits Members and employees of Congress from buying or selling securities, swaps, security based swaps, or commodity futures based on nonpublic information they obtain because of their status;
- Prohibits Executive Branch employees from buying or selling securities, swaps, security based swaps, or commodity futures based on nonpublic information they obtain because of their status;
- Prohibits those outside Congress from buying or selling securities, swaps, security based swaps, or commodity futures based on nonpublic information obtained from within Congress or the Executive Branch;
- Prohibits Members and employees of Congress from disclosing any non-public information about any pending or prospective legislative action for investment purposes;
I’am guilty of a gross negligence,when I coined the term “racist unworthy authority”.
I should’ve enlarged the integration and not omitted,”racist/sexist,unworthy authority”
Please excuse my tardiness.
Kevin?under the dominion of {R}unworthy authority,inverted racism shields racism.
So to,under{S}unworthy authority,inverted sexism protects sexism,right?
And in the sovereign realm of sexism,homosexuality is fasHioned.
As you well know KT,the devices of “unwarrented”/unworthy authority are not modern but ancient.And these devices carry the signature of “animal”not human realm.
The day of poking out the arse,and touching the earth with the knuckles are over and obsolete.
Away with the unworthy authority of “ANIMALISM”!and the “human hate-ist’s league!Or league of human hate-ist’s.
I suspect that “super spade” not Sam spade,gets gumbmunt halp to endeavor.
Just maybe rapist’s,perv’s and homosexual’s do also but only the upper level one’s.
This “league of mental-health mis-fits” are in the “human family”,every family.
Supreme thanks to the G.I.N.council for the “rescue”of this castaway.
I did cast myself away for 51 years now in hope and search of a Y.O.U.or Year Of Ulluminance and now that I behold you,,one year becomes infinity!
Thank you.And had I dared take the way and scepter of “super spade”,I’d not know freedom.
Terrific show like always. I think it is very interesting that they are not going to raise taxes on fast foods. It’s time to wake up people. Kevin, Brandy, and Andrew you guys are the best. Thank you for the time and all of the great information you give us. Joanne
I like to eat raw red delicious apple and a handful of raw nuts, raw almonds, raw cashews, raw peanuts, raw sunflower seeds after the gym.
Great show today KT! Keep up the Terrific work! Special thanks to you,Brandy, and Andrew for all your hard work and dedication.
GIVE THEM HELL KEVIN Bill
What’s Kevin’s take on 9/11? anyone have a show where he talked about that?
9/11 was planned! Kevin did do a show on it a long time ago.
Kevin is a genius! How did he get so smart?
this is the reason that we need KT to run for office. KT I have been listening to you for years. I have read every book that you have writen.
You have to run for office, we need someone to look out for us, and you are just the man.
I understand how much of a undertaking this would be for you. I support you %110.
KT for congress!!!!!!
thank you
Dan P
KT,you have used a very sensitive term,”SPADE”.When I hear it,automatically,I relate it to that term which was used to describe “black people”once a pun-a-time,{please pardon the writer’s block”.
Just as certain as race-ism was and is real,that term rubs me the wrong way because of its secret utility,that guards against its destruction,an “Ace of Spade”.
Or “inverted racism”,where you use the same race to oppress via suppression in the guise of “leadership”{bought and payed for}{pay-off}{bribe}to lead the target race over a cliff or slowly into their graves.To anywhere but actual enlightenment.
To me, this term is about “Uncle-Tom”who’d rationalize that”the Negroe was not given 40 acres and a mule” by Mr.Lincoln,so therefore it is only fitten dat “if he can’t beat da white man,then to stay alive he must join ‘em”.
Power never corrupts the worthy,yet and still power corrupts “the unworthy” and absolute power corrupts “the unworthy”,absolutely.RIGHT?
Authority is good,worthy Authority that is,but unworthy Authority is Despotic,right?
This may get lengthy,Brandy?get KT a Snicker’s{PLEASE}.I know,I know,I know,I know.
Organic,right KT?
Even J.Edger Hoover spoke of “infiltration”,and just maybe in private he questioned “the engineering of humans “for fodder,where it all began and where doe’s it stop?by the way,the purport that he crossed dressed in private life maybe that he questioned authority”a corporation”much.Enough on the making of Uncle Tom,I want focus on how this “Spade”,this weaponry of “racists unworthy” authority is used today.
{in my opinion,”racists unworthy authority” ruled Black World too,and as many glorify that time period today,they become like the people of that period busy looking a gift hoarse in the mouth that they can’t see the gingervitis.Do not get angry with me KT for using the NETFLIX promo}
WARNING,the following private observation may be too explicite for inhabitants of “Fantasy Island”,PoetryVille and,,,,,,,,,,Mental-Health-NitWit-Topia.
{HA-UMM}AH-HUM-HUM-UGHM}”DAMN”scuze-me.
In the black areas,there are no WHOLE FOODS markets,WHY?Yet plenty junk food markets.
I mean there are no centers teaching even what Mr.Richard Gregory{FIRST NAME ,POPULAR DERIVATIVE}spoke of via his nutrition diet.
Of all the black church’s not only in Baltimore,but in AMERICA ,all those people!none are in the media protesting “FOOD FACISM”yet most are as wide as a mountain.
It sickens me to see the elderly wobble pass in poor phisical stature and health,and the markets in poor communities discarding/selling poison.
And the Spade,weaves his poetic majic spell upon the primitive minds of the gullible masses,ever keeping them distracted,ever leading them over the cliff.
Selling a soul to be a Spade,pays good,many many benefits.As long as you stay in line.
However,there is an under class here in black AMERICA KT,I meet a lot of “mental-health-nitwits in Baltimore’s black community as I seek out the best and brightest to share about you and M.H.and mental deception plagues most because of the spade’s”scepter of deception”and it’s global ignorance network.
I like to be reminded of it though,it is healthy.But that is what it means to me.
It is one thing for to think that Hoover lived a secret misery,but what about these political leader’s who betray the very principles that they swore an oath to and transformed themselves into mere a political figurehead/posterchild for hidden corporate force’s with a anti agenda?
I don’t envy them.
THANK YOU KT.And thanks for the invite for next Friday,see ya.
‘
“He slipped on a bar of soap”,Kevin?L{ING}O.L.