Can someone explain to me what kinds of insider trading members of congress are engaging in that the proposed legislation would ban?

If I’m not mistaken (and please correct me of I am)... the thought is that members of congress have been trading and investing with strategies based off privileged information they receive as members of congress. Such as reports on how industries are doing, knowledge of technological advancements, etc, etc…. all things that regular investors would not be privy too.

If I am correct and that’s whats going on, I’m not really sure how it’s not already illegal. Maybe insider trading doesn’t cover it unless you receive the info directly from someone at a specific company?

I don’t know what they are specifically doing, but insider trading is supposed to be illegal (This is what Martha Stewart went to jail for) because you’re given access to “insider” tips that wouldn’t normally be accessible to everyone else.

An example would be someone tipping you off that a company has plans to make a certain move, and telling you that you should sell or buy stock because if you don’t you’ll miss out. Now this person has revealed information to that one person, but has kept everyone else in the dark, causing them to lose money.

There is all sorts of information available to congress before it is made public. Maybe you’re on the committee to fund high speed rail and the route is planned out. You may want to purchase the farmlands along side and make a killing on real estate. Or if you are aware that the economy is going to tank (as in 2008), you may want to short the financial stocks and (again) make a killing.

If you are crafting legislation that will impact a specific industry (positively or negatively) you can assess the impact before the information is public. And of course, buy or sell based on that insider information. As it turns out, insider trading laws don’t apply to congress (now there’s a surprise). Here’s a short story about it.

They cannot trade based on knowledge of non public information of a company that currently exists. But they can (currently) trade based on favorable legislation. So if they are going to approve a new aircraft purchase from Boeing, the day before the hearing they can go out and buy 10,000 shares of Boeing, wait for it to go up on the legislation being passed, and then sell at the top.

That is “insider trading” based on knowledge of what might favorably affect the company, not trading on non-public information disclosed to them.

My question is, Why hasn’t the press talked about how Congress has been benefiting from insider trading? Shouldn’t we be told? By the way, I do know what insider trading is, I just really wanted to know HOW they were using that information, like specific examples.

@Judi The 60 Minutes piece that brought this to the public’s attention did mention buying or selling defense stocks, financial stocks, and land, all based on anticipated legislation being approved.

@Judi All the instances pointed out are accurate. Congress, and particularly committee chairs, have before them a wealth of information that they can use to guide investment decisions. It;s unfair because it’s almost like playing a game of poker where you can look at everyone else’s cards in a mirror. If a stock trader, a banker, or a corporate executive jad inside information; and used it for personal profit, they’d be committing a felony. They’d risk a long sentence in federal prison. It’s outrageous that Congress, in a position to have the most far reaching of insider information, would make it illegal for anyone else to do it; but give themselves a free pass to profit on sure-thing bets.

@ETpro , I understand that. I guess I worded the question poorly. I am looking for the math. I want to see where, Senator A had information that the price of widgets was going to go up, invested in widgets and made a healthy profit before anyone else knew what was going to happen. I really can’t believe it’s not already illegal. (well, I guess I CAN believe it but it turns my stomach.)

@Judi Have you watched a clip of the CBS 60 Minutes? That lists some. The book it was based on, mentioned in the beginning of the clip I linked to, will document a lot more. Bear in mind, you can make money on losses in the market just as easily as you can profit on gains. You only need to know which way a a stock will go to make a killing.