Insider or Not? – The Congressional Bank Trades
One of the most well-known crimes in the stock market is insider trading, where an individual trades a company’s stock while having access to confidential information that is not available to the public. This can apply to the person with the knowledge, or those close to that individual who received access. That exact reason is why insider trading is so hard to pin down as it’s unclear whether purchases were made “unlawfully”, but when it’s clear the punishment is heavy.
What’s even more unclear is the rules surrounding how members of the government can trade stocks. Federal officials like the members of Congress are often briefed and aware of situations that could impact parts of the economy before the public, and it seems to create a conflict of interest. This was seen recently with the regional bank crisis, with at least 8 members of Congress or their relatives selling bank shares in the month of March, the number likely to increase. This activity is legal under law, but many question if it should due to the advantage lawmakers have when it comes to knowledge on certain sectors. The issue is not limited to partisanship either as there have been numerous instances where members of both parties made controversial moves. Back in 2020, former Republican senators Kelly Loeffler and David Perdue made countless trades before the COVID-19 crash as they were briefed about its severity earlier, and Perdue was a notorious trader during his time in the Senate. Former Speaker Nancy Pelosi of the Democratic Party also stirred controversy when her husband Paul Pelosi bought shares in chip companies ahead of the CHIPS Act. However, both parties are looking to reform the rule to prevent any form of trading with an advantage, which will have to go through these lawmakers themselves.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.