Applying Insider Trading Law to Congressmen, Government Officials, and the Political Intelligence Industry

Research Handbook on Insider Trading, Stephen M. Bainbridge ed., Edward Elgar, pp. 153-165, 2013

George Mason Legal Studies Research Paper No. LS 15-21

George Mason Law & Economics Research Paper No. 15-37

15 Pages Posted: 18 Sep 2015

See all articles by J. W. Verret

J. W. Verret

George Mason University - Antonin Scalia Law School, Faculty

Date Written: September 16, 2015

Abstract

This chapter, from Research Handbook on Insider Trading (Stephen M. Bainbridge ed., Edward Elgar 2013), considers the Stop Trading on Congressional Knowledge Act, or STOCK Act, passed by Congress by overwhelming margins in 2012 and signed by the President. The STOCK Act’s goal was to apply insider trading prohibitions contained in the Securities Exchange Act to members of Congress, their staffs, and the executive and judicial branches. This chapter will sketch the boundaries of application for the new STOCK Act, both with respect to government employees and to outside traders on political intelligence, and will explore some of the uncertainties all of these parties face in the wake of the STOCK Act. Two questions are considered. First, what unforeseen doctrinal challenges will be presented by the STOCK Act’s application of insider trading principles to members of Congress and government employees? Secondly, does the STOCK Act indirectly extend insider trading liability to outsiders trading on the basis of information that is obtained from members of Congress or government employees, and if not should the Securities and Exchange Commission (SEC) extend application to them? This chapter points to some serious doctrinal inconsistencies in the STOCK ACT’s application of insider trading doctrine under the Securities Exchange Act of 1934 to government employees.

Keywords: Congress, Dirks v. SEC, government employees, insider trading, political intelligence industry, Securities Exchange Act, Stop Trading on Congressional Knowledge Act, STOCK Act

JEL Classification: D82, K22

Suggested Citation

Verret, J. W., Applying Insider Trading Law to Congressmen, Government Officials, and the Political Intelligence Industry (September 16, 2015). Research Handbook on Insider Trading, Stephen M. Bainbridge ed., Edward Elgar, pp. 153-165, 2013, George Mason Legal Studies Research Paper No. LS 15-21, George Mason Law & Economics Research Paper No. 15-37, Available at SSRN: https://ssrn.com/abstract=2661614

J. W. Verret (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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