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Monday, November 14, 2011

"Congress is Indeed Subject to Insider Trading Laws"

Richard Green responds to a 60 Minutes report saying that Congress is not subject to insider trading laws:

David Barker writes that Congress is indeed subject to insider trading laws, by Richard Green: He points me to a paper by Donna Nagy.  I will be curious to see if a prosecutor does anything with it.

Here's the abstract to the paper:

Insider Trading, Congressional Officials, and Duties of Entrustment, by Donna M. Nagy, Indiana University Maurer School of Law, Boston University Law Review, Vol. 91, p. 1105, 2011 Indiana Legal Studies Research Paper No. 181: Abstract: This article refutes what has become the conventional wisdom that insider trading by members of Congress and legislative staffers is “totally legal” because such congressional officials are immune from federal insider trading law. It argues that this well-worn claim is rooted in twin misconceptions based on: (1) a lack of regard for the broad and sweeping duties of entrustment which attach to public office and (2) an unduly restrictive view of Supreme Court precedents, which have interpreted Rule 10b-5 of the Securities Exchange Act to impose liability whenever a person trades securities on the basis of material nonpublic information in violation of a fiduciary-like duty owed either to the issuer’s shareholders or to the source of the information. It also argues that nonpublic congressional information constitutes property which, like congressional funds and tangible property, rightfully belongs to the federal government and its citizens.

I will also be curious to see if there's any follow-up on this point. In any case, this unfair advantage that Congress has needs to be stopped.

    Posted by on Monday, November 14, 2011 at 03:33 PM in Economics, Financial System | Permalink  Comments (9)


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