Susan Collins: Congress
Insider Trading Legislation Planned
December 2, 2011
The Homeland Security
and Governmental Affairs Committee plans to produce legislation that
clearly prohibits Members of Congress from insider trading.
At a hearing called to examine legislative fixes to current laws
governing insider trading by members of Congress and their staffs,
Chairman Joe Lieberman, ID-Conn., said he hoped to pass a bill out of
Committee before Congress adjourns for the Christmas holidays.
“Perceptions are important in public service,” Lieberman said. “If the
law seems to allow members of Congress to take advantage of their public
position for personal gain, the trust that needs to exist between the
American people and our government will be further corroded than it
already is.
“Since the applicable case law on insider trading for members of
Congress is ambiguous, we should specifically proscribe it, so that
members of Congress and their staffs do not make investments based on
information they obtain as part of their jobs that is not available to
the public.”
Ranking Member Susan Collins, R-Maine, said: “Recent press reports on
“60 Minutes” and elsewhere demonstrate why we must explore the
application of existing laws to Congress, and what actions may need to
be taken to close possible loopholes that undermine the public’s
confidence in this institution.
“Elected office is a place for public service, not personal gain. As
demonstrated by the recent press stories, however, there are questions
about whether lawmakers have been exempt – legally or practically – from
the reach of our laws governing insider trading.”
The hearing was called after a 60 Minutes report on insider trading
among members of Congress, which implied that Congress had exempted
itself from laws governing insider trading.
In fact, no law specifically prohibits insider trading by anyone,
including members of Congress. All investigations and prosecutions of
insider trading are carried out based on broad anti-fraud provisions of
the Securities Exchange Act of 1934.
The
rules against insider trading encompass corporate insiders and others
who have bought and sold securities based on “material, nonpublic
information” they obtained and used in violation of a duty of trust. The
ambiguity arises because some argue that courts might hold that members
of Congress do not have the necessary fiduciary duty to the institution
of Congress.
“Whether or not it is clear and conclusive that the SEC can act against
members of Congress under its existing authority, there ought to be a
law that explicitly deters such unethical behavior by members of
Congress and punishes it when it happens,” Lieberman said.
Witnesses at the hearing included Senators Kirsten Gillibrand, D-N.Y.,
and Scott Brown, R-Mass., the authors of separate insider trading bills.
Other witnesses were: Melanie Sloan, Executive Director of Citizens for
Responsibility and Ethics in Washington; Donna M. Nagy, the C. Ben
Dutton Professor of Law at the Indiana University Maurer School of Law;
Donald Langevoort, the Thomas Aquinas Professor of Law at Georgetown
University Law Center; John Coffee, Jr., the Adolf A. Berle Professor of
Law at Columbia Law School; and Robert Walker, former Staff Director for
both the House and Senate Ethics Committees.
