Gregory H. Shill is an Associate Professor of Law at the University of Iowa College of Law. This post is based on his recent paper, forthcoming in the Indiana Law Journal. Related research from the Program on Corporate Governance includes Insider Trading Via the Corporation by Jesse Fried (discussed on the Forum here).
In March 2020, as millions of Americans—a record number of them newly jobless—locked themselves indoors to help fight an accelerating pandemic, they learned that two U.S. Senators had been warned about COVID-19 in a secret briefing and then proceeded to cash in their shares in the nick of time. The stocks Sens. Richard Burr and Kelly Loeffler traded included companies, like hotel chains, that were especially sensitive to the coronavirus. This scandal sparked renewed interest in congressional insider trading—and exposed gaps in current law and leading reform proposals alike. In a new Essay, Congressional Securities Trading, I use the occasion of the pandemic trades to offer a fresh perspective on this evergreen topic.
The Essay addresses a basic tension: Members of Congress are perpetually in possession of material nonpublic information (“MNPI”), yet for various reasons need to trade securities from time to time. This framing, which reflects a securities regulation orientation rather than litigation and enforcement, is new to scholarship on the issue and works in tandem with adversarial measures. It borrows from a related context—public company regulation—which has largely been overlooked. And it offers a way to both prevent dubious trades in general and disgorge the profits that result from those that slip through.