Beware the Ides of March

Just like Julius Caesar was stabbed in the back in 44 BC by conspirators in the Roman Senate, so too are we being taken advantage of by our elected officials. You may have heard of the STOCK Act which received Senate approval February 2nd and cleared the House February 9th. STOCK is an acronym (all the rage in legislative circles now-a-days) for Stop Trading on Congressional Knowledge. This law was passed after significant public pressure following a story by the television show 60 Minutes in November of last year. Prior to the 60 Minutes story the bill languished in legislative limbo for years and only came to light thanks to populist outrage finally demanding something be done. The ruling was supposed to bring Congressmen and Senators in line with the rest of us when it comes to trading on inside information. Regulators and law enforcement have cracked down on such illegal activities recently in a number of high-profile cases (see former Galleon hedge fund manager Raj Rajaratnam and his 11 year prison sentence handed down last year). Personally, I applaud the effort but question the effectiveness of the new law, which basically rehashes rules against insider trading that are already in place and seems to have been done more for public relations reasons than for any moral or ethical ideals. I think we can all agree that rules for elected officials shouldn't be any different than they are for the rest of us. The poster boy for this legislation seems to be Representative Spencer Bachus (R-AL) who, as chairman of the House Financial Services Committee, is accused of profiting from trades made before major policy announcements were made public - clearly “material, non-public information.” While most of his trades were small (less than $10,000), there are no de minimis exceptions for this type of rule violation. He is likely not the only one who would be suspected of violating insider trading rules should the issue be investigated carefully. Lastly, it seems somewhat of a conflict of interest that the Securities and Exchange Commission (SEC) is the body responsible for enforcement of this new legislation. The same SEC that receives its funding from the very people it is supposed to objectively police and investigate. Not surprisingly the bill passed both the House and Senate by a large margin and the complete text can be found here:

. The following Senators, for some reason or another, chose not to support the bill: Jeff Bingaman (D-NM), Richard Burr (R-NC) and Thomas Coburn (R-OK). Kirk Mark (R-IL) did not cast a vote. On the House side Representatives John Campbell (R-CA) and Rob Woodall (R-GA) dissented. At a time when our elected officials jump at any opportunity to get positive press one must wonder why some refuse to support a bill that should be a no-brainer. Perhaps they have something to hide.