Blacking Out Congressional Insider Trading: Overlaying a Corporate Mechanism Upon Members of Congress and Their Staff to Curtail Illegal Profiting
Congressional Insider Trading, Blackout Period, Congress, Enforcement
Congressional insider trading involves members of Congress or their staff trading on material, nonpublic information attained while executing their official responsibilities. This type of private profit-making, while in a government role, casts doubt on the efficacy and impartiality of lawmakers to regulate companies they hold shares of. Egregious acts of illegal profiting from insider trading based on information entrusted to the government escape prosecution and liability due to fundamental gaps in the common law and the Congress specific statutes lack enforcement. Recent calls on Congress by the public and multiple bipartisan proposed bills in both chambers have begun to address this issue of illicit profiteering. However, these bills suffer from the same enforcement and disclosure hurdles that stymied the now decade old Stop Trading on Congressional Knowledge Act of 2012 (“STOCK Act”). Adopting a corporate mechanism, congressional blackout periods surrounding key events is a trackable and simple-to-monitor system to keep lawmakers in check. Congressional blackout periods bookending closed door hearings would prevent trading at moments where material, nonpublic information is likely to be used to avoid losses or extract higher gains.
Nicholas Gervasi, Note, Blacking Out Congressional Insider Trading: Overlaying a Corporate Mechanism Upon Members of Congress and Their Staff to Curtail Illegal Profiting, 28 Fordham J. Corp. & Fin. L. 223 (2023).
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