Here's Why Congressmen Are Allowed To Make Insider Trades

As we mentioned a couple months ago, Congressmen aren’t subject to the same insider trading regulations as the rest of us. Some elected officials have reportedly crossed the ethical line to inflate their personal wealth, using secret knowledge to make timely stock trades.

The matter of why those elected to Congress are allowed to make like Gordon Gekko is a tough one, but The Motley Fool wades through the technicalities to come up with a plausible explanation.

To summarize, court interpretations of Security and Exchange Commission rules maintain that insider trading bans are in place to prevent people from using inside information of businesses they’re affiliated with for personal benefit. Since elected officials aren’t connected to companies they glean inside information about, they aren’t betraying the businesses’ trust by making trades. The thinking goes that to convict a Congressperson of insider trading, the SEC would have to prove that he violated the trust of the government or the people it represents.

Thanks to the unstable legal ground on which any claims against Congressmen stand, it will probably take an act of Congress to strip itself of any insider trading rights it has thanks to legal loopholes. We doubt doing so tops their list of priorities.

Why Congress Isn’t Liable for Insider Trading [The Motley Fool]