Senate bans insider trading on Capitol Hill

@CNNMoney March 22, 2012: 1:54 PM ET
The Senate will send to President Obama on Thursday a bill banning insider trading on Capitol Hill.

The Senate will send to President Obama on Thursday a bill banning insider trading on Capitol Hill.

WASHINGTON (CNNMoney) -- The Senate on Thursday overwhelmingly passed a bill that makes it illegal for lawmakers and their staffs to make Wall Street trades based on insider information.

The bipartisan measure, which already passed the House, would immediately go to President Obama, who is expected to sign it. Obama called for the law during his State of the Union address in January.

While insider trading is already illegal, there's some question as to whether current laws that focus on Wall Street apply to Capitol Hill, where lawmakers and staff are encouraged to discuss pending legislation with firms that might be impacted.

The bill would clarify that lawmakers and staff can't use special information about pending or potential federal government activity to trade stocks.

However, Congress passed a weaker bill than some have advocated.

A Senate bill passed in February would have also required those research firms that gather intelligence to help predict Washington policy for Wall Street to register and disclose fees in the same way lobbyists do. The Senate bill also would have also more clearly defined public corruption, giving the Department of Justice stronger tools to go after bribery in Congress.

On Tuesday, Senate Majority Leader Harry Reid said he didn't have enough support to move quickly on the the registry or the strengthened public corruption laws, a move that angered Iowa Republican Charles Grassley.

"It's another example of Wall Street being heard in Washington and the common person in the United States not having its will expressed," Grassley said. "If you seek information to trade stocks, Congress, the executive branch and the American people ought to know how you are."

The congressional ban on insider training was some six years in the making. But momentum came from a CBS "60 Minutes" piece last year, which suggested a few lawmakers had made money from inside political knowledge from the financial crisis.

After that report, the Office of Congressional Ethics started looking at Rep. Spencer Bachus, the chairman of the House Financial Services Committee, who acknowledged last month he is under investigation for possible violations of insider trading laws. The Alabama Republican maintains that he will be cleared.

The U.S. Securities and Exchange Commission polices illegal insider trading. The current ban prevents the buying and selling of securities when trades are based on nonpublic information gleaned through a breach of a corporate officer's responsibility to protect shareholders' interests, known as "fiduciary duty."

Congress fell into a gray area, because lawmakers and staffers are expressly allowed and encouraged to discuss pending legislation or the political process that could impact private firms or Wall Street.

As it stands now, lawmakers don't really have a fiduciary duty, because they viewed themselves as in the "public sphere," said Craig Holman, lobbyist for the watchdog group Public Citizen.

"Insider trading has never been applied to Congress or staffers," Holman said. "This makes it very specific: Yes, it's illegal to trade on information gleaned from the halls of Congress." To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.95%4.01%
15 yr fixed3.10%3.12%
5/1 ARM3.09%3.11%
30 yr refi3.97%4.04%
15 yr refi3.14%3.15%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
CNNMoney Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.