What’s the reasoning behind members of Congress and their staff being exempt from Insider trading laws? | The Action
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What’s the reasoning behind members of Congress and their staff being exempt from Insider trading laws?


What’s the reasoning behind members of Congress and their staff being exempt from Insider trading laws?

Members of Congress are not exempt from the Insider trading laws, though the application can be carried out a little differently. This can be defined as a legal way or a loophole. Take it anyway. The STOCK act applies to everyone; from the executive level employees to Congress members, it also puts ethical restrictions on the Vice-President as well as the President. The rules vary from country to country, but in the US, the passing of the STOCK Act has been a positive step.

Are the members of Congress and their staff being exempt from the Insider trading law?

The answer is no. No one is immune to the law, however, the way law applies can make a difference. This is considered a legal loophole. The information that is traded is supposed to be kept confidential however that doesn’t happen, and to whom, members of Congress have a duty of confidentiality whether or not they have any material information that is yet to be made public. This information can highly impact and manipulate Stocks. In the context of Insider trading, there are debates about whether the Speech and Debate Clause of the U.S. Constitution protects Congress against Insider trading. This can be simply defined as a legal loophole.


What is the Stock Act?

Stock law was passed by the Obama administration on April 4, 2012. It was signed into law to combat Insider trading. Apart from prohibiting and restricting Congress from Insider trading, it puts restrictions on executive-level employees and also ethical obligations on President as well as the Vice-President. Stop Trading on Congressional Knowledge (STOCK) Ac makes it illegal to trade any information that’s yet to be made public, and until and unless, it’s not in the public domain, it’s prohibited.

Why is it illegal?

In some countries, it’s ambiguous but in the US it’s prohibited thanks to the STOCK act. The legality is justified as the Insider has access to the exclusive information that gives him/her an advantage in influencing the value of company stocks. This is considered unfair as many of the traders will not be able to have that information and will lag. Though it has been a part of the business, but only recently serious regulations were brought in by the US government to combat Insider trading for real. The Stock Act passed by the Obama Administration is one of that.



The stock law was passed in 2012 by the Obama Administration and the sole purpose of this law was to combat and restrict Congress to indulge in Insider trading. This applies to the President, the Vice president, executive employees, and the Congress and restricts them from making any sort of individual profit by access to any non-public information. However, the way it applies to Congress in case of violation or other matters a lot. Though the law doesn’t exempt anybody, some serious legal loopholes are a matter of debate.



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