Congressional Securities Trading

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Fall 2020

Gregory Shill

University of Iowa College of Law, gregory-shill@uiowa.edu

Follow this and additional works at: https://www.repository.law.indiana.edu/ilj
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Responsibility Commons, and the Securities Law Commons

Recommended Citation

Shill, Gregory (2020) "Congressional Securities Trading," Indiana Law Journal: Vol. 96 : Iss. 1 , Article 7.

Available at: https://www.repository.law.indiana.edu/ilj/vol96/iss1/7

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Journal of Financial Economics 125 (2017) 26–47 Contents lists available at ScienceDirect Journal of Financial Economics journal homepage: www.elsevier.com/locate/jfec Information networks: Evidence from illegal insider trading R tips Kenneth R. Ahern Marshall School of Business, University of Southern California, 701 Exposition Boulevard, Ste. 231, Los Angeles, CA 90089-1422, USA a r t i c l e i n f o a b s t r a c t Article history: This paper exploits a novel hand-collected data set to provide a comprehensive analysis Received 20 April 2015 of the social relationships that underlie illegal insider trading networks. I find that in- Revised 15 February 2016 side information flows through strong social ties based on family, friends, and geographic Accepted 15 March 2016 proximity. On average, inside tips originate from corporate executives and reach buy-side Available online 11 May 2017 investors after three links in the network. Inside traders earn prodigious returns of 35% JEL Classification: over 21 days, with more central traders earning greater returns, as information conveyed D83 through social networks improves price efficiency. More broadly, this paper provides some D85 of the only direct evidence of person-to-person communication among investors. G14 ©2017 Elsevier B.V. All rights reserved. K42 Z13 Keywords: Illegal insider trading Information networks Social networks 1. Introduction cation between investors ( Stein, 2008; Han and Yang, 2013; Andrei and Cujean, 2015 ). The predictions of these mod- Though it is well established that new information els suggest that the diffusion of information over social moves stock prices, it is less certain how information networks is crucial for many financial outcomes, such as spreads among investors.
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The Challenges of Prosecuting Congressional Insider Trading by Robert K

Portfolio Media. Inc. | 111 West 19th Street, 5th Floor | New York, NY 10011 | www.law360.com Phone: +1 646 783 7100 | Fax: +1 646 783 7161 | customerservice@law360.com The Challenges Of Prosecuting Congressional Insider Trading By Robert K. Kelner, Peter Koski and Clayton Bailey (June 18, 2020, 5:32 PM EDT) Allegations that U.S. senators traded on confidential briefings about COVID-19 have brought new enforcement attention to the rarely used Stop Trading on Congressional Knowledge, or STOCK, Act. In a sign of significant escalation, last month the FBI reportedly seized the mobile phone of Sen. Richard Burr, R-N.C., in connection with one such investigation, even as the U.S. Department of Justice announced it was closing investigations into Sens. Kelly Loeffler, R-Ga., Jim Inhofe, R-Okla., and Diane Feinstein, D-Calif. The FBI also reportedly served a warrant on Apple Inc. seeking data stored in Burr's Robert K. Kelner iCloud account. The STOCK Act, first enacted in 2012, prohibits members of Congress and other government officials from trading on material nonpublic information "derived from such person's position as a Member of Congress or employee of Congress or gained from the performance of such person's official responsibilities."[1] While these allegations may resemble traditional insider trading, the challenges for prosecutors are unique and exacting. Charges under the STOCK Act have never been brought against a member of the legislative branch, and prosecutors face at least Peter Koski two potentially existential challenges due to the nature of legislative work. First, the U.S.