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Michael Michaud

Insider Trading Bill Awaiting Action
By Representative Mike Michaud
Feb 3, 2012 - 3:40:26 PM

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In November, a CBS 60 Minutes expose reported on the unfortunate practice of Members of Congress using their influence and power to make a profit with non-public information. While the Securities in Exchange Act of 1934 banned insider trading on Wall Street, its application to elected officials is often disputed.

For example, if an individual on Wall Street knows that a company is set to gain a big contract, it is illegal - and unethical - to buy stock in that company before the contract is finalized and public. Why should Members of Congress be able to make financial decisions before government contracts are awarded or bills are considered for a vote?

Wall Street is governed by and punishable under the Securities in Exchange Act of 1934. Though the Code of Ethics for Government Service clearly states that no person in government service should "use any information coming to him confidentially in the performance of governmental duties as a means for making private profit", it's time for Congress to take strong action and impose strict penalties for those that violate the public trust.

During his State of the Union Address, I was pleased to hear President Obama urge passage of the Stop Trading on Congressional Knowledge (STOCK) Act, which passed the United States Senate this week. Last fall, I signed on to this legislation as a co-sponsor, because I firmly believe that Congress and its employees should never be above the law.

While I am glad that legislation banning insider trading has gathered such strong support from both sides of the aisle, I am deeply disappointed that it is necessary in the first place.

A 2011 study showed that stocks owned by members of the House of Representatives outperformed the market average by 6% between 1985 and 2001. A similar study conducted in 2004 found that stocks owned by members of the Senate outperformed the market average by an astounding 12% between 1993 and 1998. While no one should be able to dictate where an individual chooses to invest his or her money, we should insist upon high ethical standards, especially for those who serve the people.

The STOCK Act rectifies this issue by prohibiting all federal employees, including Members of Congress, from using nonpublic information for personal benefit. The bill takes a step toward full transparency, requiring that all Representatives publish all transactions of stocks, bonds and other securities, to their website.

During this session, the STOCK Act has already garnered 273 bipartisan cosponsors. With Americans growing increasingly frustrated with Congress - and I join them in that frustration - I hope that we can get this bill to the President's desk quickly.

Representative Mike Michaud

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