A panel of experts suggested ways to fix proposals that aim to curb insider trading on Capitol Hill at a hearing Thursday.
Still, not everyone was convinced the legislation is necessary.
Sens. Kirsten Gillibrand (D-N.Y.) and Scott Brown (R-Mass.) have introduced similar but not identical versions of the Stop Trading on Congressional Knowledge Act, which seeks to prevent Members of Congress and their staffers from making investment decisions based on knowledge they gain from their jobs.
The bill became popular in Congress and among some voters following a “60 Minutes” segment that alleged that Members routinely trade on insider information.
But panelists disagreed on whether current securities laws are already strong enough to prosecute Members and staffers who profit off non-public information they learned on the Hill.
Donna M. Nagy, a law professor at Indiana University, said her research found that current laws could be applied to Congressional insider trading, contradicting the “60 Minutes” report, which argued the practice is essentially legal.
Sen. Susan Collins asked Nagy whether that should be a reason to oppose the law.
“Even if you’re correct, is there an advantage to making it crystal clear by passing such a law?” the Maine Republican asked.
Nagy argued that a poorly written law could make the situation worse by creating the perception that the STOCK Act, and not other securities laws, is the only law that applies to Members of Congress.
All of the witnesses agreed that Congressional trades should be posted in an online searchable database, although they disagreed on how much time should elapse before a stock purchase or sale would need to be reported.
Other ideas to strengthen the current proposal that were floated during the hearing included: changing the definitions of key insider trading terms to match those currently used in the court system; authorizing the Securities and Exchange Commission to add a section to its rule that deals with fraud or deceit in connection with securities trading to specifically mention misappropriation of information by Members of Congress; and adding financial disincentives to ethics rules that would fine lawmakers based on the value of prohibited trades.
“No disrespect to any of you, but America doesn’t trust you,” said witness Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington, after floating the idea.
“There’s been a breakdown of trust, a need to re-establish that connection. ... It’s disturbing,” Brown said.
Rep. Elijah Cummings, D-Md., right, hugs Harold Schaitberger, General President of the International Association of Fire Fighters, after the Congressman spoke at the IAFF's Legislative Conference General Session at the Hyatt Regency on Capitol Hill, March 9, 2015. The day featured addresses by members of Congress and Vice President Joe Biden.