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REAL WORLD EVENT DISCUSSIONS
Congress' insider trading
Monday, February 20, 2012 9:17 AM
Gettin' old, but still a hippie at heart...
Quote:Lobbyists were in a tizzy on Tuesday over provisions of a Senate-passed ethics bill that tighten regulation of lobbying and require secretive “political intelligence” firms to register in the same way as lobbyists.
House Republicans and their floor leader, Representative Eric Cantor of Virginia, said they would amend the bill, going to the House floor this week, to strengthen it.
But Representative Louise M. Slaughter, Democrat of New York, said, “I think ‘strengthening’ here is a euphemism for ‘weakening.’ ”
And Representative Tim Walz, Democrat of Minnesota, said the bill, to ban insider trading by members of Congress, was being rewritten behind closed doors by House Republican leaders.
“How ironic,” Mr. Walz said. “Insiders now appear to be writing a bill meant to ban insider trading.”
The bill is intended to restore trust in Congress, but Mr. Walz said the revisions could “make the cynicism that’s rampant in America even greater.”
The thrust of the bill, passed in the Senate last week by a vote of 96 to 3, is to prohibit members of Congress from trading stocks and other securities on the basis of confidential information they receive as lawmakers.
An amendment offered by Senator Charles E. Grassley, Republican of Iowa, requires individuals or firms that collect intelligence from political insiders to register as lobbyists do.
At present, Mr. Grassley said, when lawmakers and their aides meet with “political intelligence consultants,” they have no way of knowing if the information they share will be sold to hedge funds, private equity firms or other investors who make a profit on it.
Ms. Slaughter, who introduced insider trading legislation in 2006, said the regulation of political intelligence-gathering was “the most important part of the bill.”
Howard Marlowe, president of the American League of Lobbyists, a professional group, said, “The legislation moved so quickly that we did not have an opportunity to discuss it with Senator Grassley or his staff.”
Under the bill, Mr. Marlowe said, “the definition of political intelligence is very fuzzy.” It includes information derived from contacts with Congress or federal agencies that is “intended for use in analyzing securities or commodities markets, or in informing investment decisions.”
J. Patrick Cave, managing partner of the Cypress Group, which does lobbying and policy research for investors, said: “People are freaking out about the Grassley amendment. For many, it’s new, and it remains rife with loopholes, but it’s a good start, clarifying the law and expanding disclosure requirements to include everyone.”
Mr. Cave and other experts on lobbying said the bill would require companies like Goldman Sachs and Morgan Stanley and law firms like Patton Boggs to register and disclose the clients for whom they did policy research analyzing developments in Washington.
Michael W. Mayhew, who has analyzed the demand for such services as chairman of Integrity Research Associates in New York, said the global market for political intelligence services exceeded $400 million a year. He estimated that close to 300 companies systematically collected such information.
Under the bill, Mr. Mayhew said, some of the political intelligence coming out of Washington would be classified as “material nonpublic information” and “people who invest on it could go to jail for insider trading.”
In a bulletin sent to clients this week, Covington & Burling, one of the largest law firms in Washington, said the bill could have an immense impact on “the business community.”
“Hedge funds, private equity funds and investment advisers — many of which are not currently registered under the Lobbying Disclosure Act — might now be required either to register or to alter their business practices to avoid the need for registration,” the bulletin said. “If, for example, a hedge fund calls a Congressional committee staffer to gather information about the status of a bill that relates to the fund’s investment decisions, the fund may need to register.”
Robert K. Kelner, chairman of the political law practice group at Covington & Burling, said: “We have been flooded with calls about this legislation. I suspect there is a lot of lobbying to change it.”
Indeed, said Representative Slaughter, critics are “flooding Congress to try to weaken this bill.”
House Republicans said they would add a provision to prohibit members of Congress, their aides and executive branch officials from receiving special access to initial public stock offerings because of their positions. http://www.nytimes.com/2012/02/08/us/politics/ban-on-insider-trading-by-congress-faces-gop-revisions-in-house.html
Monday, February 20, 2012 2:49 PM
Beir bua agus beannacht
Tuesday, February 21, 2012 6:57 AM
Quote:Insider trading occurs when a trade has been influenced by the privileged possession of corporate information that has not yet been made public. Because the information is not available to other investors, a person using such knowledge is trying to gain an unfair advantage over the rest of the market.
Using nonpublic information for making a trade violates transparency, which is the basis of a capital market. Information in a transparent market is disseminated in a manner by which all market participants receive it at more or less the same time. Under these conditions, one investor can gain an advantage over another only through acquiring skill in analyzing and interpreting available information. This skill is based on individual merit and awareness. If one person trades with nonpublic information, he or she gains an advantage that is impossible for the rest of the public. This is not only unfair but disruptive to a properly functioning market: if insider trading were allowed, investors would lose confidence in their disadvantaged position (in comparison to insiders) and would no longer invest.
Information is defined as being material if its release could affect the company's stock price. The following are examples of material information: the announcement that the company will receive a tender offer, the declaration of a merger, a positive earnings announcement, the release of the company's discovery such as a new drug, an upcoming dividend announcement, an unreleased buy recommendation by an analyst and finally, an imminent exclusive in a financial news column. http://www.investopedia.com/articles/03/100803.asp#axzz1n2GCNTCh the simplest version I could find right off...it's more fully explained at the website. And yes, I imagine it's difficult to enforce and I'm sure it happens all the time. It's not just "helping out your friends", it's doing something for monetary gain when you have special knowledge, or telling someone else how to do it. And yes, the stock market in my opinion too is one of the worst things we've got and has been responsible for a LOT of bad things, but there it is. And if we let people who know things others don't AFFECT the stock market (like driving up the price of a share because they know a merger is going to happen before anyone else), then why would anyone bother investing? Obviously those within companies know all kinds of stuff and will make the stock exchange go up and down, and I can't know when, so why would I bother?
Yes, stocks are a joke to me too...things DO go up and down unexpectedly, there are too many ways to "game" the system, insider trading DOES happen and people don't get caught, and on and on. It's just an attempt to "keep it fair"--or really, to make the average investor THINK it's being kept fair--so they'll go on buying stocks.
What gauls me is that EVERYONE, if caught, is breaking the law and might go to jail EXCEPT CONGRESS! I can't imagine why this is, given they're privvy to more insider information than just about anyone except CEOs, etc., and it blows my mind that they have to have a SPECIAL bill/law to tell them they can't do it! Just one more example of how there are different rules for different classes of people in the US. Oops, but that would be calling it "class warfare" now, wouldn't it?
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