15 May Will Congress expand the Insider trading prohibition?
US Congress has passed many laws to regulated and brings Insider trading under the law. The first law to prohibit Insider trading was passed in 1934, but it fell out of fashion as the country struggled with many things initially. However, with the Obama administration passing the law in 2012, there has been the anticipation of expansion. The law puts quite some restrictions not just on simple traders but on Congress, executive-level employees as well as the president. With the trading market growing day by day, the things inside and outside are supposed to change. As it records its transformation, the laws regulating and restricting certain things will surely change.
What is Insider trading?
Insider trading is considered unethical as it gives the Insider an advantage over other traders. To put it in simple words, Inside trading is the buying and selling of Company stocks by any person who has access to any non-public information about the stocks. This information helps a lot in directing the investment and gives them an upper hand in the whole market. There are laws and regulations regarding the use of public information and as long as it’s not public, it is prohibited. Though there are Corporate insiders who are connected with Insider trading as well.
What is the Stock Act?
Stop Trading on Congressional Knowledge (STOCK) Act was passed on April 4, 2012. This was brought in to restrict Insiders trading by the Obama Administration. Apart from the prohibition it puts on Congress, it also restricts the president. So what is it? The law prohibits the use of any non-public information for personal profits. The law applies to the whole Congress, executive-level employees, and also puts restrictions on President as well as Vice-President. Until and unless, the information is made public, its use is prohibited. The Act as of now plays an important role in combating Insider trading in the US , however, there are different rules and regulations in other countries regarding Insider trading.
Will the insider trading information be expanded?
The information can be obtained by theft, bribery, or espionage; by a violation of any federal law, by conversion, misappropriation or unauthorized and deceptive taking of information, and by breach of any personal relationship or trust. However, there is no statue to what constitutes Insider trading and what doesn’t. As far as the state definition is considered, it is quite broad and Congress will certainly use it to expand the law. The best part about the law is its flexibility through which it can also be applied to unprecedented situations as they may arise in the future.
There is no legal definition to Insider Trading as it is hard to know how the information was acquired, but there are strict regulations to combat it. The current law allows Congress to use its flexibility to expand and it is a sure thing to expect that the law will be expanded as the situation arises in the future.