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Jim Himes Co-Sponsors Legislation to Stop Congressional Insider Trading

Posted by Larry Doyle on November 21, 2011 5:10 PM |

A week ago, I wrote Sense on Cents Calls Out Congress to Pass H. R. 1148 Outlawing Congressional Insider Trading.

In the midst of writing my commentary, I highlighted that:

I called my Congressman Jim Himes (D-CT) this afternoon and informed his spokesman of my initiative here at Sense on Cents. I let him know that Jim’s name will be published at Sense on Cents as supporting this legislation or not.

I got his spokesman’s attention and let him know how great the blogosphere was at spreading this type of information. He fully understood.  He informed me that he would speak to Jim and would respond within two weeks.

I welcome highlighting Jim’s photo above as a precursor of how we can make this initiative a VERY PUBLIC undertaking.

Whether or not Jim Himes “heard” my call or read my commentary, who knows. That said, I am happy to give credit where it is due as Himes recently announced that he is co-sponsoring the STOCK Act.

Himes’ office released the following statement entitled, Himes Pushes to End Congressional Insider Trading:

Congressman Jim Himes (CT-4) is cosponsoring legislation that prevents Members of Congress and their staffs from trading stocks based on nonpublic information they obtain through their work in Congress.

While Members of Congress are subject to the same insider trading rules as other individuals, there are no specific regulations regarding their work in Congress. “I am appalled that this legislation is necessary, but from what we’ve seen in the news this week, we can’t take any chances,” said Himes. “I am supporting this legislation because we must give Americans the confidence that their Representatives are acting exclusively in the interests of the people and communities they represent, not their own wallets.”

Himes is right. This legislation should not be necessary if those in Congress possessed the values and principles which any decent American would expect of their elected representatives.

The Stop Trading on Congressional Knowledge (STOCK) Act (H.R. 1148) prohibits Members of Congress and their employees from buying or selling securities, swaps, security-based swaps, or commodity futures based on nonpublic information they obtain because of their position. It also requires Members and their staffs to report those transactions within 90 days if the cost of the trade is more than $1,000.

Since taking office, Himes has actively worked to eliminate the possibility that conflicts of interest could occur in his personal operations. The week he was appointed to the House Committee on Financial Services, Himes voluntarily divested himself of any financial interests in the financial services and insurance industry.

To eliminate even the appearance of a “pay-to-play” scenario for earmarks, Himes adopted a policy that prohibits executives, board members, and lobbyists of organizations that receive an earmark at his request from donating to his campaign. He also cosponsored legislation to prohibit that practice.

I plan on calling back Himes’ office to thank him for co-sponsoring this legislation. At the same time, I will inform him that I plan on tracking this legislation as it moves its way through Congress. I will name names of those who support this legislation and those who don’t.

Moving right along, I see that Himes has been named to the House Committee on Financial Services.

Isn’t that interesting. How so?

Perhaps we can finally have somebody on that committee properly address the questions raised in a letter sent up to the Hill by the Project on Government Oversight in February 2010 addressing a wide array of questions dealing with our friends at FINRA. I wrote then, Is FINRA’s Future in Doubt?

Are the days of Wall Street’s self-regulatory organization known as FINRA numbered?

In the opinion of the very credible Project on Government Oversight, they should be. Why?

Significant failures, massive conflicts of interest, and more. POGO’s comprehensive and scathing letter to four separate House and Senate committees touches upon every failing within FINRA, with the exception of the integrity of the proxy statement used in the formation of the organization itself.

Strong allegations in a current lawsuit against FINRA make the case that Mary Schapiro lied verbally during roadshows and in the proxy statement. (For details on this lawsuit read here.)

Despite not addressing the issues embedded in that lawsuit, POGO touches all the other bases and covers all the other issues surrounding this organization. America deserves to be introduced to the organization that, in my opinion, squarely has a foot in both the Wall Street and Washington camps.

I make no excuses in categorically stating that FINRA defined the Wall Street-Washington incestuous relationship. I have no interest in vindication of my writing so much about FINRA over the last thirteen months.

I have every interest in exposing the issues embedded in this organization. America needs to truly learn about the issues surrounding FINRA and how and why this organization failed to uphold its charge to protect investors.

I congratulate POGO for bringing these issues to the Hill. I humbly submit and STRONGLY recommend you read, review, and share this letter with friends and colleagues. The pursuit of truth, transparency, and integrity within the Wall Street financial regulatory system goes to a whole new level with this letter:

February 23, 2010

House Committee on Financial Services
House Committee on Oversight and Government Reform
Senate Committee on Banking, Housing, & Urban Affairs
Senate Committee on Finance

Dear Chairman and Ranking Member:

The Project On Government Oversight (POGO) is writing to raise concerns that Congress’s efforts to reform the financial regulatory system have not adequately addressed the failures of the private self-regulatory organizations (SROs) that are tasked with protecting the investing public and maintaining the integrity of our financial markets.

Specifically, we urge you to take a much closer look at the Financial Industry Regulatory Authority (FINRA)—an SRO that regulates thousands of securities brokerage firms—and to consider whether FINRA can ever be an effective regulator given its cozy relationship with the securities industry.

I plan on calling Himes’ office again tomorrow. Hopefully we can go two for two.

Larry Doyle

Isn’t it time to  subscribe to all my work via e-mail, an RSS feedTwitter or Facebook? Do your friends, family, and colleagues a favor and get them to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • Randy B

    Well Larry,

    I told you I would keep you informed about the response from my reps here in California on the Insider Trading legilsation.. I always get replies from them on every issue I write to them about (and unfortunately for them, lately I do write them reasonably often)… but this time.. not even the courtesy of a single reply here in the State of California from Adam Schiff, Barbara Boxer or Diane Feinstein.. nothing whatsoever… after several days. That has never happened before.

    However, first things first.. perhaps we should be doing the very same thing regarding whatever it takes to get the money given back to customers of MF Global who stole funds from their trading customers and apparently turned around and fraudulently pledged them to other parties and/or paid themselves large bonuses just before the bankruptcy filing.

    My present belief is that if the money from those so-called “segregated customer accounts” does not get restored to the rightful owners (the customers) in fairly short order, a majority of non-institutional traders may pull out of the markets for good. I mean if your broker has full and unrestricted access to just go and rob the funds from your trading account (fortunately I am not a customer of MF Global but you never know which company might be next!) whenever they please.. and even hypothecate those stolen monies to other entities.. (a process which should be made illegal immediately if not sooner) then what trader other than the big institutions will ever have the clout to get the money restored to their trading accounts?

    Are they letting those poor people twist in the wind for some reason? Don’t they know liquidity is going to decline precipitously in the near future if people can no longer trust that their accounts are safe from theft?

    What the hell is going on this country these days? No wonder we keep hearing about more and more people buying guns and ammo. It seems the government doesn’t give a rat’s behind what happens to regular citizens at all and is absolutely right in your face about it, bold as can be… while totally pandering to any and all corporations of size, lobbyists, unions and other special interest groups. It is almost like they are daring people to try and do anything about it.

    Please tell me how on Earth, other than disbanding Congress in its entirety, we can legally and peaceably resolve the egregious and worsening behavior of our government in this country. I truly must be missing something.

    Best Regards,
    Randy

  • Peter S.

    It is stunning to think that members of Congress have used their positions to illegally profit through securities transactions based on non-public information, all the while the American families making the greatest sacrifice a citizen can contribute, soldier on so honorably. In this time of crisis, it’s supposed to be all hands on deck – not all hands on d#%ks! Stunning, shameless, and ultimately -utterly sad.

  • LD

    In light of this reality, I think a VERY appropriate question of any and all incumbents would be a release of all their investment and trading activity.

    Who in the media will hold their feet to the fire?

  • PS

    Congratulations Larry. I am attaching the below link so your readers can get a sense of each of their representatives financial conditions. I wonder if there are any connections to the wealth of a representative and how they would vote on this issue?

    http://www.usatoday.com/news/washington/story/2011-11-15/congress-wealthy-1/51216626/1

  • Sandsgrandmother

    This bill is not reaching far enough and is skirting the other levels that need to be attached.
    This does not stop the people in government on any level from distributing this information to their friends, family and other acquaintances and making a deal under the table with them. It has to be stopped from the time they receive this information to a certain number of years after including family, friends and others they may talk with.

  • Gail

    What these people have done is already illegal. The STOCK act just gives tacit immunity to criminals. It also doesn’t address the fact that IPO offerings are a bribe. It’s just another sham that hopes to give the people the impression that something is happening when nothing meaningful is happening.

    The SEC should investigate and prosecute. The FBI should investigate and prosecute. The president should be outraged, but he is silent. Who will authorize and investigation of HIM?

    If you are as offended as I am, please make a point to NEVER vote for another Democrat OR Republican. Always “write in” the candidate of your choice. I’ve been doing this for about 20 years. You might be very suprised by how clean you will feel when you leave the voting booth.

  • LD

    No surprise here. Instead of fast tracking this legislation and making sure it is properly addressed and enacted, the incestuous nature of the Wall Street-Washington relationship will likely once again carry the day.

    Is Eric Cantor so beholden to the monied interests of the financial services industry not to embrace this legislation? How else are we to explain the following:

    Why Is Eric Cantor Blocking the Congressional Insider Trading Act?

    In a strange and unexpected twist, the Republican leader in the House of Representatives is now blocking progress on a bill that would definitively outlaw insider trading by federal lawmakers.

    The Republican sponsor of the bill in the House, Financial Services Chairman Spencer Bachus of Alabama, had scheduled a markup of the Stop Trading on Congressional Knowledge (STOCK) Act for next week.

    But on Wednesday, Majority Leader Eric Cantor of Virginia cancelled the markup session.

    Cantor reportedly said he blocked the bill to give Congress more time to examine the issue. Critics of the move, however, fear that any delay could kill the bill entirely.
    Some version of the the STOCK Act has been bouncing around Capitol Hill for six years. But recent attention to the issue of Congressional insider trading, following reports from CNBC’s Eamon Javers and a “60 Minutes” report, brought the bill out of stasis and made its passage into law seem likely. If the latest delay pushes the bill into next year, it may become lost in election-year politics.

    Trading by lawmakers based on non-public information about legislation falls into what many see as a loophole in insider trading regulations.

    • fred

      Kleptocracy is defined by Wikipedia as a form of political and government corruption where the government exists to increase the personal wealth and political power of it’s officials and the ruling class at the expense of the wider population, often without pretense of honest service.

      LD, they are daring us to try and stop them. I don’t see how that is possible given the current ‘pacivity and complacency’ of the Tea Party and the widespread marginalization of the Occupy Movement.

      Just as reputational risk is misrepresented and hidden by Wall Street, ‘kleptocractical risk’ is misrepresented and hidden by political posturing and campaign financing.

  • LD

    I recently received the following communication from a reader who had reached out to his Congressman on this topic.

    Dear Mr. B…..,

    Thank you for contacting me regarding your support for the Stop Trading on Congressional Knowledge Act (STOCK) Act (H.R. 1148). I appreciate hearing from you and welcome your input.

    As you know, the STOCK Act would prohibit the purchase or sale of either securities or commodities for or by a person in possession of material nonpublic information regarding pending or prospective legislative action if the information is possessed by the individual because the individual is a Member of Congress, an employee of Congress or is a federal employee or if the information was obtained knowingly from a Member or employee of Congress. The legislation amends the rules of the House of Representatives to prohibit designated House personnel from disclosing material nonpublic information relating to any pending or prospective legislative action relating to either securities of a publicly-traded company or a commodity if such personnel has reason to believe that the information will be used to buy or sell the securities or commodity based on such information.

    I am a cosponsor of this legislation because I share your belief that Members of Congress should not be able to profit from knowledge that the general public cannot access. The bill has been referred to several House Committees, where it awaits further action.

    Please be assured that I will keep your views in mind when this issue is considered on the House Floor.

    Thank you again for your thoughts. I hope you will continue to share your views and ideas with me.

    Sincerely,

    Adam B. Schiff
    Member of Congress

  • BM

    From: Senator Scott P. Brown
    To:
    Sent: Tue Dec 20 09:22:49 2011
    Subject: Thank you for contacting the Office of Senator Scott P. Brown

    Dear………..,

    Thank you for contacting me regarding the Stop Trading on Congressional Knowledge (STOCK) Act (S. 1871). As always, I value the input of my constituents and strive to keep you updated on the important issues facing us today.

    On November 15, 2011, I introduced the STOCK Act. With the American people losing faith in Congress, the STOCK Act is a small but meaningful step to help re-establish trust and confidence. Legislators need to affirm that we live by our oath of office, and we need to truly play by the same rules as the people that we pledge to faithfully represent. In a study conducted between 1993 and 1998, economist Alan J. Ziobrowski found that the common stock portfolios of U.S. Senators outperformed the market on average by 12% annually. The typical U.S. household’s portfolio, on the other hand, underperformed the market by 1.4% on average during the same time period. I firmly believe that eliminating any question about members potentially trading on inside information will improve the relationship between citizens and their elected officials.

    The STOCK Act’s principle aim is to prevent Members of Congress from profiting off nonpublic material information. S. 1871 would prohibit Members and employees of Congress and the Executive Branch from buying or selling stocks, bonds, or commodities futures based on nonpublic information they obtain because of their privileged status. This bill would prohibit Congressional Members and employees from disclosing any nonpublic information about any pending or prospective legislative action obtained from a member or employee of Congress for investment purposes. Congressional Members and employees would be required to report the purchase, sale or exchange of any stock, bond, or commodities future transaction in excess of $1,000 within 90 days.

    On Thursday, December 1, 2011, I was privileged to participate in a Homeland Security and Governmental Affairs Committee hearing as both a witness and questioner addressing the issue of Congressional insider trading and the STOCK Act. More recently, the Committee considered and voted to report to the full Senate a revised version of the STOCK ACT. I am hopeful that the full Senate will quickly take up and pass this important legislation.

    Again, thank you for sharing your thoughts with me. Should you have any additional comments or concerns, please do not hesitate to contact me or visit my website at http://www.scottbrown.senate.gov.

    Sincerely,
    Scott P. Brown
    United States Senator

  • Mr. B.

    Dear Mr. B……:

    Thank you for contacting my office to express your concerns about alleged insider stock trading by Members of Congress and their staff. I appreciate hearing from you and apologize for the delay in my response.

    There are currently laws against insider trading and they apply to Members of Congress and their staff. The recent broadcast of the news program, “60 Minutes,” was about expanding the definition of insider trading to include non-public information gathered by virtue of being a Member of Congress. If this type of activity by Members is occurring, it is clearly unethical, if not already illegal.

    Be assured that I support expanding the definition of insider trading to include non-public information gained during Congressional work. I am a cosponsor of the “Stop Trading on Congressional Knowledge Act” or “STOCK Act” (S. 1903) introduced by Senator Kirsten Gillibrand (D-NY). This bill would make it illegal to purchase or sell stock based on legislative knowledge from government officials. S. 1903 would also amend Senate rules to ban Senators from sharing information gained from their Congressional work for the purpose of trading stock, and it would require Members and their staff to disclose, within 90 days, stock transactions in excess of $1,000. This legislation is currently pending in the Senate Committee on Homeland Security and Governmental Affairs.

    S. 1903 is an important step toward greater transparency in our system, and I look forward to supporting it when it comes to the Senate floor for consideration.

    Again, thank you for writing. If you have any additional questions or comments, please feel free to contact my Washington, D.C. office at (202) 224-3841. Best regards.

    May I wish you and your family a happy and healthy holiday season.

    Sincerely yours,

    Dianne Feinstein
    United States Senator

    • lex

      What about the Crook Nancy Pelosi and her insider trading, per 60 mminutes.

  • lex

    JIm Himes is a phony about the insider trading legislation. That bill was introduced last spring and went no where. Himes came on Board only after the 20 minutes expose. As far as I can tell, the bill is still going no where. After all, Nancy Polosi profited from insider trading per the 20 minutes expose. I ahve not heard Jim denounce Nancy for that.

    And as far as we know, Jim has not ordered his staff to avoid insider trading.

  • LD

    I recently received the following from a regular reader.


    Dear Mr. S…..,

    Thank you for contacting me in support of H.R. 1148, the Stop Trading on Congressional Knowledge (STOCK) Act. I appreciate hearing from you and am glad we agree on this important issue.

    The STOCK Act would prohibit Members of Congress and Congressional employees from utilizing nonpublic information obtained through their official positions to inform their investment strategies. In addition, it would require a disclosure within 90 days of any financial transaction over $1,000, including the purchase or sale of stocks, security-based swaps, or commodities.

    I am a proud cosponsor of this legislation because I believe Members of Congress must go beyond the letter of the law to provide increased transparency in financial decisions so that Americans can be sure their representatives are acting in the public interest.

    It would be unconscionable for any Member of Congress or other government official to financially benefit from knowledge gained in an official capacity. It is important to note that House ethics rules already prohibit Members of Congress from profiting off of confidential information obtained through official duties and that the Securities and Exchange Commission (SEC) may prosecute Congressional insider trading under current law. Rest assured I will continue to support policies to increase transparency by Members of Congress and will work to enact the STOCK Act.

    Thank you again for sharing your thoughts with me. If you would like more information on this or other issues, or to sign up for my regular e-newsletter, visit my website at http://www.lowey.house.gov. Please do not hesitate to contact me if I can help you in any way.

    Sincerely,

    Nita Lowey
    Member of Congress






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