As you likely know, insider trading as we know it today has been frowned upon and basically illegal for decades now. And it only makes sense that it is, as it’s essentially cheating, using “insider” information to trade stocks you know will succeed.
However, you may not know that the act has only been illegal for those elitists in Congress since 2012. As Investopedia explained, before that, “trading based on material nonpublic information… was both legal and commonplace among members of Congress.”
But in 2012, Congress decided to pass the Stop Trading on Congressional Knowledge or STOCK Act, which made it illegal for members of Congress to trade stocks that they knew about via the committees the participated and laws being discussed in their line of work.
In the House, it passed 417 to two, and in the Senate, 96 to three was the vote, with obvious bipartisan support.
And since then, congress members that participate in individual trading must report all of their investments by a certain time each year, ensuring that they are not a ‘conflict of interest’ or using insider information to achieve their financial gains.
Yet, it seems the punishment for not doing so is so measly that it does nothing to incentivize members of Congress to abide by the rules, or at least on time.
As a report from Insider recently pointed out, no less than 14 members of the combined Upper and Lower Houses have violated the STOCK Act in 2021, which “could expose them to ethical problems.”
In the House, the lawmakers in “danger” of violating federal law are Republican Representatives, Pat Fallon of Texas, Pennsylvania’s Dan Meuser, Blake Moore of Utah, Lance Gooden from Texas, Kevin Hern of Oklahoma, Chris Jacobs of New York, and Diana Harshbarger from Tennessee. Democrat Representatives are Susie Lee of Nevada, Tom Malinowski from New Jersey, New York’s Sean Patrick Maloney and Tom Suozzi, and Kim Schrier of Washington.
In the Senate GOP member, Tommy Tuberville of Alabama and Democrat Dianne Feinstein from California were included as well.
As you can see, it’s not just one side or one house that’s acting unethically here.
According to Insider, they failed to report their trades, “many to a significant degree.” To be clear, the report doesn’t specify that insider trading wasn’t going on. And by the looks of some of the gains received by some congress members, I’d say it had to be.
Take Senator Diane Feinstein, for example. She apparently only violated the act one time by failing to report a single trade that netted her $15,000. According to the report and herself, she has since paid the fine required as punishment but did not offer proof of it.
Or what about Rep. Schrier. She, too, only made one trade violation, with a net of a whopping $500,000.
Other members, such as Rep. Pat Fallon, failed to report some 118 trades in a timely manner, which totaled about $9,113,000. However, the report noted that Fallon has since paid all of the fines and has been on time in reporting his trades since he was made aware of his violations. He even “self-reported himself to the Ethics Committee” to make sure his fines were paid.
This seems to imply that he simply didn’t know the rules or understand them fully at the time of his violations.
However, the same cannot be said for Democrat Tom Suozzi, who violated the act some 300 times so far, netting him at least $3,200,000. According to the report, the congressman has been mum on the whole ordeal, refusing to comment on whether he has paid his fines or not.
But that’s not nearly all of it. As the outlet and several other sources have confirmed, these 14 are only the most excessive violators of the act. Apparently, some other 33 members have “failed to properly report their financial trades” as required by the STOCK Act.
So just what is this fine that has been enacted as punishment?
Well, according to Insider, the standard fine is a mere $200, and sometimes, House or Senate ethics officials wave it entirely.
No wonder there are nearly 50 congressional members in “violation” of financial ethics. I mean, no one likes to be fined, but $200 compared to the millions being earned is nothing but pocket change.
This has given many a reason to push for harsher punishments and more accountability. Based on this report, I’d say they are definitely needed. Wouldn’t you?