Is a Congressional Investment Ban for the Greater Good?
Investing is a sector where members of congress thrive because they are the ones who get the news first. However, the STOCK act has revolutionized trading as it encourages credibility and informational equality. How do these laws affect the financial industry at large?
The peoples’ trust in the American government has statistically shown to deplete over the course of decades. The last time members of congress were trusted by the American people was in 1972 during Nixon’s presidency. In 2022, financial analysts have brought up this topic more frequently. The stock market is a confusing place for some but for congressmen, it is the place where they can feel most comfortable. The question of government members getting insider information was first asked in 2012 where the public voiced their insecurities with the profits made by government members. The Stop Trading on Congressional Knowledge (STOCK) act was passed in that year regarding how congressmen had to trade. Government members were told to announce their trades publicly so that the public knew when and what they were trading. However, one major issue with this law that was passed was that they gave members 30 days in which they had to announce their trades. Meaning that if they made a trade on 10/2/2022, they would be able to announce that they made that trade on 11/1/2022. If they failed to announce their trade, then they were fined $200.
This law affects most investors because of one particular thing. Since the beginning of the stock market in 1792, government members and their family members were the leaders of investing purely because they always knew what was going on. The public followed whatever they invested in and gained profits in that way. Newspapers during those times did not include information about the stock market meaning that ordinary people could not acquire the information necessary to invest in the market. However as this information spread throughout newspapers and other sources of information, more and more people started investing, leading it to be more of an independent job. Nowadays, financial analysts and regular people have gotten much better at reading stock charts resulting in them not being influenced by the choices of the government. People still follow members of congress when it comes to which sector they invest in as they are aware of which sector will profit or not because of new and/or upcoming rules and regulations.
The current investment ban which officials are suggesting disables government officials from investing and completely gets rid of the chance of using insider information for profits. This idea is one that has been brought up in previous years but was seen as irrational. After more years of members of congress earning unreal amounts of money, it could not be ignored anymore by the public. The stock market for years has been about how anyone, as long as they are trustworthy and credible, could invest in companies fairly with the same information as others. Congressmen have violated this unwritten rule, but their families and themselves should still be able to invest in the stock market. This is because they are still people at the end of the day. Amends such as making congressmen publicly announce their trades on the day that they make the trade is fair. The fine for violating this act (Member’s monthly salary) however should stay the same.
What Does This Mean for the Future:
If this act were to pass, it would result in investors to be very skilled in reading charts as well as they will not have the government to rely on for which sector to invest in. This would result in current investors to lose money as they will not know when to sell their stocks or to buy and that is why members should still be able to invest but with stricter regulations.