A proposed ban on insider trading by members of Congress and staffers provides a ‘useful clarification’ of the fact that Capitol Hill is already subject to the same trading limitations as everyone else, SEC chair Mary Schapiro said yesterday.
Pending legislation, the Stop Trading on Congressional Knowledge (STOCK) Act would not create a new category of material non-public information that applies only to Congress, Schapiro added. ‘Insider trading laws, contrary to some popular opinion… apply to members of Congress already,’ she said, responding to a question from IR Magazine.
Schapiro was speaking to a group of business journalists at the Society of American Business Editors and Writers’ (SABEW) conference in Indianapolis yesterday.
The self-imposed ban clarifies that ‘members of Congress owe a duty to Congress, to the government and to the American people’ to protect material non-public information, Schapiro said.
The legislation, which had been perennially proposed by a few legislators and virtually ignored by most members of Congress for years, gained momentum after the airing of a television news program last fall. It detailed trading profits by several prominent lawmakers – both Democrats and Republicans – that seemed to be based on inside information or privileged access to IPOs.
Schapiro acknowledged that questions about constitutionally protected speech granted to members of Congress in their official capacity create ‘challenges’ for the regulator in enforcing insider trading prohibitions, but none of those challenges are ‘show-stoppers from our perspective.’
The pending legislation also does not threaten to overturn or undermine the SEC’s aggressive pursuit of insider trading cases in recent years, Schapiro commented.
Two versions of the STOCK Act are hung up between the House and the Senate over whether to require political intelligence researchers and analysts to register as lobbyists. Schapiro declined to comment on the differing versions.
In her prepared remarks, Schapiro warned the audience that another piece of legislation – the Jumpstarting our Business Startups Act, which is meant to ease the process for small companies to go public – would ‘weaken investor protection by chipping away at the wall now in place between research analysts and underwriters.’
Recalling the scandals of the dotcom era that led to the global research analyst settlement, Schapiro warned: ‘We should not walk backward here. Collusive behavior between analysts and bankers cost investors huge sums, shattered confidence in the integrity of research and damaged the markets.’
In addition, she said the SEC intends to focus on greater monitoring and oversight of high-frequency trading and is examining proposals to reduce money market volatility.
