What Insider Trading?

Oh to have the stock trading success of Paul Pelosi. On Tuesday, Just the News reported that Paul Pelosi (husband of Speaker of the House Nancy Pelosi) just made a really smart stock purchase.

The article reports:

Paul Pelosi, House Speaker Nancy Pelosi’s husband, purchased between $1 million and $5 million of stock in a semiconductor company ahead of an upcoming vote on legislation containing $52 billion for chipmakers — the latest in a long history of similar purchases.

…Pelosi’s husband made headlines when he purchased a substantial amount of tech stock last year under his wife’s speakership. Pelosi made millions on “timely” bets with Big Tech stock buys in advance of an antitrust bill that was moving through the House, according to a Fortune report from July 2021. 

The antitrust legislation ultimately stalled, but Pelosi tech stock buys have continued throughout this year. In March, the speaker disclosed that her husband bought Apple as well as Disney and PayPal shares. 

Retail traders track Pelosi’s trades to “find winners,” Yahoo reported.

The article notes:

There are several bills still pending in Congress that impose some form of a ban on lawmakers making individual stock purchases, but some would not cover spouses. 

Peter Schweizer, author of the 2011 book “Throw Them All Out,” was instrumental in educating the public about the lack of stock trading laws applicable to members of Congress. After his book was published, Congress passed the STOCK Act, and former President Obama signed it into law. The bill is designed to prevent insider trading, but it doesn’t ban members of Congress or their spouses from buying individual stocks. Under the bill, lawmakers are required to file financial disclosure reports that show the purchases made. 

Schweizer has long called on Congress to prohibit lawmakers and their spruces [sic] from trading individual stocks. 

The article concludes:

Pelosi’s office has said she had “no prior knowledge” of her husband’s stock purchase.

“The speaker does not own any stocks,” said Pelosi spokesman Drew Hammill, according to FOX Business. “As you can see from the required disclosures, with which the Speaker fully cooperates, these transactions are marked ‘SP’ for Spouse. The Speaker has no prior knowledge or subsequent involvement in any transactions.” 

The legislation with the funding for chipmakers is designed to shore up America’s semiconductor supply chain to better compete with China. The House passed its version of the America COMPETES Act earlier this year. The Senate passed their own version last June. A conference committee is preparing the final legislation, which could be voted on as early as this week.

The article notes:

Retail traders track Pelosi’s trades to “find winners,” Yahoo reported.

I think Martha Steward should ask for her jail time back.

 

A Law Without Enforcement Isn’t Really A Law

On Wednesday, Business Insider posted an article which might partially explain how people who enter Congress as middle-class Americans seem to become millionaires very quickly.

The article reports:

Congress and top Capitol Hill staff have violated the STOCK Act hundreds of times. But the consequences are minimal, inconsistent, and not recorded publicly.

So we have no idea who is doing insider trading.

The article continues:

Congress has a spotty and inconsistent method for collecting fines from members and top staffers who break a federal law designed to stop insider trading and conflicts of interest, an Insider investigation found. 

Insider’s investigation of financial disclosures found that 49 members of Congress and at least 182 of the highest-paid Capitol Hill staffers were late in filing their stock trades during 2020 and 2021.

Lawmakers and senior congressional staffers who blow past the deadlines established by the 2012 Stop Trading on Congressional Knowledge Act are supposed to pay a late fee of $200 the first time. Increasingly higher fines follow if they continue to be late — potentially costing tens of thousands of dollars in extreme cases.

But accountability and transparency are decidedly lacking. 

No public records exist indicating whether these officials ever paid the fines. Congressional ethics staff wouldn’t confirm the existence of nonpublic ledgers tracking how many officials paid fines for violating the STOCK Act. And 19 lawmakers wouldn’t answer questions from Insider about whether they’d paid a penalty. Ten other lawmakers said they’d paid their fines, but they declined to provide proof, such as a receipt or canceled check. 

The article concludes:

“If you are a member of Congress, you have this duty to not take advantage of information you learned because of your job,” said Gellasch (Tyler Gellasch, a fellow at the Global Financial Markets Center at Duke University School of Law), who previously served as congressional staffer to former Democratic Sen. Carl Levin, of Michigan, and helped draft the STOCK Act.

Virginia Canter, the chief ethics counsel at Citizens for Responsibility and Ethics in Washington, said Congress’ laissez-faire approach to the STOCK Act “sends the message that they are held to a lesser standard than other government employees, and that they are above the law.”

Canter called lawmakers’ stock-trading habits “an accident waiting to happen.” Their difficulties complying with the transparency and accountability provisions in the STOCK Act underscored why members shouldn’t trade individual stocks, she added.

Spanberger agreed: “We have regulations, we have rules, we have standards for a reason. And not enforcing them or abiding by them creates fertile ground for people to behave improperly.”