Did You Know? Little-known facts in the congressional insider trading debate
US Senators’ average annual stock performance beat the market average by approximately 12.3%, while stock purchases made by corporate insiders on average outperform the market by 7.4% and stock portfolios of the average US household underperform the market by 1.5%.
Insider trading was not federally regulated until 1934 when President Franklin D. Roosevelt signed into law the Securities Exchange Act following the 1929 stock market crash.
William Duer, who was appointed the first Assistant Secretary of the US Treasury in 1789, was the first known inside trader. He used his official position to gain inside information for speculating in the newly formed US investment market.
In 2007, the 10 wealthiest US Senators traded stocks in a total of 45 different companies spanning finance, insurance, oil, pharmaceutical, telecom, and other industries. Those 45 businesses also received $18 billion in federal appropriations that same year.
Congressman Oakes Ames was censured by Congress in 1873 for bribing other Representatives to avoid investigating his illicit government contracts that profited the railroad and construction companies in which he was a stockholder.
Although commonly considered illegal, insider trading can also be legal.
A person who is convicted of insider trading can be fined up to $5,000,000 and/or imprisoned up to 20 years.
A person is not subject to imprisonment for insider trading if it can be proven that he/she had no knowledge of the rule or regulation that was violated.
After the market crash of 1929, JP Morgan & Co. gave guaranteed profits and sold specially discounted stocks to select clients including former President Calvin Coolidge, then sitting Treasury Secretary, chairmen of both the Republican and Democratic national committees, and CEOs of General Electric, AT&T, and Standard Oil.
Until 1977 Congressional representatives had no restrictions on their non-congressional income and no rules about disclosing their finances and investments to the public.
Employees of 817 executive agencies, 17 executive offices, and 132 independent agencies are prohibited from trading stocks based on insider government information, unlike Congressmen and Supreme Court Judges.
Two Congressional representatives are trying to extend insider trading regulations to the legislative branch with the Stop Trading on Congressional Knowledge (STOCK) Act that was introduced in 2006, 2007, and again on Jan. 26, 2009 but has not come to a vote (as of Apr. 8, 2009).
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http://insidertrading.procon.org/viewresource.asp?resourceID=002662#II
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