Failures of the Stock Act and the Future of Congressional Insider Trader Reform
On February 13, 2020, Senator Richard Burr sold personal stocks in thirty-three separate transactions worth between $628,000 and $1,720,000. On the same exact day, Burr’s brother-in-law, Gerald Fauth, sold between $97,000 and $280,000 worth of shares in six companies. As Chairman of the Senate Intelligence Committee at the time, Burr had received closed-door COVID-19 briefings, and had attended the private Senate Health Committee briefing with former Center for Disease Control Director Robert Redfield and Dr. Anthony Fauci on January 24. Shortly after the January 24th briefing, Burr co-authored a Fox News op-ed in which he noted the “alarming” ability of the virus to spread, but also stated that the United States had “a framework in place” that put the nation “in a better position than any other country to respond to a public health threat.”
Around three weeks after the op-ed was published, Burr delivered a much grimmer message at a luncheon with a small group of select constituents, warning that the virus was “much more aggressive in its transmission than anything we have seen in recent history.” Nonetheless, the Department of Justice quietly closed its months-long investigation into Burr’s financial activity in January 2021, stating that it would not pursue insider trading charges against him.
Unfortunately, the problem of congressional insider trading is not new. Scandals relating to members of Congress using their offices for private gains date back to at least 1968 and have plagued both political parties. Beyond the prominent scandals, studies consistently show that the investments of members of Congress outperform the market. The optics of congressional trading, particularly in times of national emergency, further erode the public’s trust in Congress’s ability to legislate fairly.
This Comment suggests that there is a straightforward solution moving forward. Part I provides a brief overview of insider trading law in the United States. Part II outlines the various challenges associated with successfully bringing congressional insider trading cases. Finally, Part III argues that, in light of the lessons learned from the COVID-19 congressional insider trading scandals, Congress should completely ban its members from trading individual stocks.Subscribe to ACLR