Congress and Insider Trading: A Controversial Relationship

By Joseph
July 3, 2023


Congress and insider trading have a long and controversial relationship. Congress has long been accused of using insider information to gain an unfair financial advantage in the stock market, and the debate over whether or not this is ethical or legal has been ongoing for many years. In 2012, a congressional investigation revealed that members of Congress had made millions of dollars by trading stocks based on non-public information. 

This led to an overhaul of existing laws and regulations, and the introduction of the STOCK Act, which prohibits members of Congress from profiting from non-public information. Despite these changes, the issue of insider trading remains a contentious one and has been the subject of much debate, both in the legislative branch and in the public.

Congress and Insider Trading

Insider trading is the illegal practice of trading securities based on non-public information. Insider trading is a violation of federal securities law and is punishable by both civil and criminal penalties. The U.S. Congress has taken steps to prevent and punish insider trading since the 1980s when the first insider trading laws were passed.

Congress has passed several laws over the years to combat insider trading. The most important of these laws is the Insider Trading Sanctions Act of 1984, the Insider Trading and Securities Fraud Enforcement Act of 1988, and the Stop Trading on Congressional Knowledge (STOCK) Act of 2012.

The Insider Trading Sanctions Act of 1984 established criminal penalties for insider trading and enhanced the SEC’s enforcement authority. The Act prohibits any person from buying or selling securities while in possession of material, non-public information. It also prohibits the use of such information to make a profit or avoid a loss.

The Insider Trading and Securities Fraud Enforcement Act of 1988 strengthened the SEC’s enforcement authority by making it easier for them to bring civil and criminal actions against violators of insider trading laws. The Act also made it a crime to trade stock using material, non-public information.

The Stop Trading on Congressional Knowledge (STOCK) Act of 2012 was passed in response to a series of reports alleging that members of Congress had used insider information to make profitable stock trades. The Act prohibits a member of Congress, an employee of Congress, or an executive branch employee from using non-public information to make a profit in securities transactions. It also requires members of Congress and other government employees to disclose any transactions they make in stocks, bonds, and other investments.

Recent Cases of Insider Trading by Congress

Rep. Chris Collins 

Rep. Chris Collins, a Republican from New York, has been indicted on charges of insider trading. The charges stem from a probe by the U.S. Attorney’s Office into Collins’s involvement in a company called Innate Immunotherapeutics Ltd.

According to the indictment, Collins used his position as a member of Congress to gain access to confidential information about the company, which he then used to help his son and a few other associates make profitable investments. The indictment alleges that Collins tipped off his son about a failed drug trial at Innate Immunotherapeutics, which resulted in his son and the others selling their stocks before the news was made public, avoiding a substantial loss.

The indictment also charges Collins with making false statements to the FBI during the investigation. If convicted, Collins could face up to 20 years in prison.

Rep. Duncan Hunter

Rep. Duncan Hunter is a former Republican congressman from California who was indicted in 2018 for alleged misuse of campaign funds. In December 2020, he was also indicted on charges of insider trading. 

The indictment accuses Hunter of using his position as a congressman to access confidential congressional information and share it with his wife, Margaret Hunter. The pair then allegedly used the information to make profitable investments. The indictment further alleges that they made a profit of more than $150,000. 

The charges of insider trading by Rep. Hunter are a serious offense and could lead to a lengthy prison sentence if convicted. Insider trading is illegal in the US and carries a maximum penalty of up to 20 years in prison and fines of up to $5 million. 

The indictment of Rep. Hunter is an example of how even elected officials can be held to account for alleged criminal acts. Justice must be served in this case to ensure that public officials are held to the same standards as everyone else. 

Rep. Tom Price 

Rep. Tom Price has been accused of engaging in cases of insider trading by Congress. In 2017, it was reported that he purchased discounted shares of an Australian pharmaceutical company, Innate Immunotherapeutics, using the information provided to him by a private congressional briefing. This purchase was made in 2016, before the public announcement of a new drug trial that would significantly increase the value of the company. 

The U.S. Office of Congressional Ethics investigated the matter and ultimately cleared him of any wrongdoing. However, there are still concerns regarding the case that the investment was made with information not available to the general public. 

Price has since sold his shares and has stated that he was unaware of any non-public information concerning the company. He also maintains that he received no special treatment during the transaction and that it was done following the law. 

The case of Rep. Tom Price and his alleged insider trading has raised concerns about the ethical standards of members of Congress. Members of Congress need to be held to a higher standard to ensure that they are not using their positions for personal gain.

Rep. David Schweikert 

In 2019, Rep. David Schweikert (R-AZ) was accused of and subsequently admitted to, multiple counts of ethical misconduct, including misusing campaign funds and failing to properly report campaign contributions and expenses. The House Ethics Committee launched an investigation and revealed that he had violated House rules and federal laws, and had made a series of improper financial transactions. 

The most serious allegation against Rep. Schweikert was that he was involved in insider trading. It was alleged that he used his position in Congress to leverage political intelligence and gain information that enabled him to make profitable trades. Although Rep. Schweikert denied any wrongdoing and maintained that he was not aware of the consequences of his actions, the House Ethics Committee recommended that he be reprimanded and fined for his actions. 

The House Ethics Committee also determined that Rep. Schweikert had failed to keep accurate financial records, which constituted a violation of House rules. In August 2020, Rep. Schweikert agreed to pay a $50,000 fine and accept a formal reprimand from the House to resolve the investigation. 

Rep. Stephen Fincher

In 2012, Rep. Stephen Fincher was accused of insider trading while a member of the U.S. House of Representatives. The allegations centered around a suspicious stock purchase made by Fincher while he was a Congressman. Fincher purchased a large amount of stock in a company called Innate Immunotherapeutics in June 2016. Fincher had received a confidential briefing from the company that same month regarding a potential drug trial that could have had a dramatic impact on the company’s stock price. 

The allegations triggered a formal investigation by the Office of Congressional Ethics (OCE), the independent organization responsible for investigating the misconduct of members of Congress. The OCE found that there was enough evidence to suggest that Fincher’s purchase of the stock in question was made with non-public information and was therefore a violation of House rules. The OCE referred the case to the House Ethics Committee for further investigation. 

The Ethics Committee ultimately decided to not pursue the case, as there was not sufficient evidence to support the allegations. However, Fincher was later forced to pay a $40,000 fine to the Federal Election Commission for using campaign funds to purchase the stock in question.

Controversy Over Congress and Insider Trading 

The STOCK Act Controversy 

The STOCK Act Controversy has been a source of much debate and controversy in recent years. The STOCK (Stop Trading on Congressional Knowledge) Act was introduced in 2012 as an attempt to address the issue of insider trading by members of Congress. The act prohibits members of Congress and their staff from using non-public information to trade stocks and other securities. It also requires disclosure of certain financial transactions by members of Congress.

The controversy surrounding the STOCK Act arises primarily from questions about its effectiveness. Opponents of the act argue that it does not go far enough to address the problem of insider trading by members of Congress, as it does not require public disclosure of all financial transactions and does not impose any penalties for violations. Supporters of the act argue that it is a necessary step in the right direction and that further enforcement and disclosure measures are needed to truly address the problem.

The Keating Five Controversy

Keating, the Five Controversy, involved allegations that five Senators from the United States manipulated regulatory bodies to help Charles Keating, the head of a savings and loan association. Keating’s protection from scrutiny was allegedly facilitated by lawmakers Aaron Cranston, who was Dennis DeConcini, John Glenn, Senator McCain, and Donald Riegle. Three senators resigned while another two were censured as a result of the scandal.

The controversy surrounding the Keating Five focused largely on the perceived ethical lapses of the senators involved. Critics accused the senators of using their positions to benefit themselves or their friends and of failing to act in the public interest. Supporters argued that the senators were simply trying to protect a constituent and that their actions were not illegal or unethical. The Keating Five scandal is often cited as an example of the dangers of insider trading by members of Congress.

The Tom DeLay Controversy  over insider trading 

Tom DeLay was a former Republican congressman from Texas and the former House Majority Leader. In 2005, he was embroiled in a controversy involving allegations of insider trading. DeLay was accused of using his political influence to make a profit from investments in companies that received federal subsidies and contracts. He was also accused of using his connections to secure special favors for his friends and family. DeLay denied the allegations and the charges were eventually dropped.

The “Culture of Corruption” Controversy  over insider trading 

The “Culture of Corruption” Controversy was a term coined by the Democratic Party in 2006 to describe the ethical lapses of the Republican Party in Congress. This controversy focused on the use of special interest money to influence legislation. The controversy was highlighted by the Jack Abramoff scandal, in which he was found guilty of bribing public officials and using insider information to make financial gains. The scandal also revealed connections between Abramoff and key members of the Republican Party, including Tom DeLay.

The Jack Abramoff Controversy over insider trading 

The Jack Abramoff Controversy was a major scandal that began in 2005 and exposed the influence of special interest money on the political process. Abramoff was convicted of multiple counts of bribery, fraud, and tax evasion, and he was found guilty of using insider information to make financial gains. His connections to Tom DeLay, as well as to other members of the Republican Party, were revealed as part of the scandal. The scandal prompted changes in the way campaign contributions were regulated and monitored.


The relationship between Congress and insider trading is a controversial one that has been under scrutiny for decades. Despite the enactment of the STOCK Act in 2012 to prevent members of Congress from profiting from non-public information, there are still concerns that Congress may be taking advantage of their positions to gain financially. It is clear that Congress needs to have greater transparency and oversight when it comes to financial activities, and that more legislation is needed to ensure that Congress does not engage in insider trading. Ultimately, only through greater transparency, oversight, and legislation can the public be assured that Congress is acting in the public’s best interest.

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