While company insiders for private corporations have strict rules dictating how and when they can trade on the information they are privy to as insiders, members of Congress have long been able to take public policy information unavailable to the public and use it to trade stocks. Or at least, they could. Now, President Obama has signed the STOCK Act. That stands for the Stop Trading on Congressional Knowledge Act, and it specifically forbids members of Congress from trading on insider knowledge they acquire in the course of their duties.
President Calls for Limits on Congress
The law calls for members and employees of Congress to report any transactions within 45 days of making them. It also expands the pension forfiture that accompanies acts of corruption to include insider trading.
In comments before signing the act, President Obama called for further limits to create greater fairness. Calling a sense of fairness a cherished notion for Americans, he said "It's the notion that the powerful shouldn't get to create one set of rules for themselves, and another set of rules for everybody else." Adding later, “We were sent here to serve the American people and look out for their interests—not to look out for our own interests,”
President Obama also used the day as a platform to push for broader reforms of rules on lobbying.
"We should limit any elected official from owning stocks in industries that they have the power to impact," he said. "We should make sure people who bundle campaign contributions for Congress, can't lobby Congress, and vice versa."
Old Practice Comes to a Close
The revelation that members of Congress could trade on insider information came as a shock to many when it was revealed last year, but the STOCK Act was initially introduced to congress in 2006 by Rep. Louise Slaughter (D., N.Y.) and members of Congress have long been exempt from insider trading laws. However, a series of articles in the Wall Street Journal in October of 2010 and a 60 Minutes piece that aired last November led to the bill's quick passage in 2012 after a public outcry.
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