Congress and Insider Trading

Democratic lawmakers apparently want to ban insider trading by members of Congress and their staffs. Perhaps unsurprisingly, these groups have so far been exempt from the general prohibition against insider trading.

Rather than broadening the ban, however, Congress should repeal it entirely. The ban is problematic on efficiency and equity grounds.

The ban is inefficient to the extent it delays release of relevant information, since this means delayed adjustment of stock prices. Markets cannot allocate resources properly unless they know which companies are doing well or badly.

The ban is inequitable because some corporate executives trade on inside information despite the law. Thus the ban rewards dishonest insiders.

Comments

[ビブラム]

Thank you for your article.That makes sense！