Experts suggest financial reforms as insider trading questions engulf Congress
After lawmakers make questionable trades ahead of and during the coronavirus crisis, Congress may choose to limit its own access to Wall Street. Securities insiders on the left and right argue reform is past due.
In the halls of power on Capitol Hill, lawmakers frequently learn secret information sure to move the world’s financial markets once that knowledge eventually goes public. Acting on insider info is illegal – but trades aren’t always scrutinized.
"Members of Congress are not having to pre-clear their trading activity despite this wealth of information they have that nobody else does," said Tyler Gellasch.
As a former Democratic senate-staffer, securities lawyer, and SEC regulator Tyler Gellasch knows the country’s trading laws inside-and-out.
He argues even the perception that lawmakers are financially capitalizing on the coronavirus crisis proves the need for tighter restrictions on their investments.
"They’re here to serve us, not their own wallets," he said.
Gellasch contends lawmakers should only be able to invest broadly in stock markets, through mutual or index funds, not in individual companies.
George Mason Law Prof. J.W. Verret – who served on President Donald Trump’s 2016 transition team – largely agrees but would carve out a few exceptions.
"I don’t want to discourage small business owners from running for Congress," he said of his reticence to over-regulate.
Verret argues those who founded a company or have a stake in the family business, shouldn’t be forced out. When that isn't the case, he would like to see a new law give lawmakers a grace period to divest old holdings.
While Gellasch suggests real-estate transactions need tighter restrictions and scrutiny as well, Verret said no amount of regulation can remove all conflict between lawmakers finances and day jobs.
"There are inherent conflicts of interest with respect to political giving and indirect political support that they all face, all the time," he noted, "and the only way we can police that is with disclosure."
Lawmakers are divided on the question of whether to pass more restrictions on their own investments.
It’s also unclear whether the president would sign-off, on new restrictions for Congress. President Trump broke with modern White House tradition, by refusing to release his personal tax returns, or fully separate from his business interests.