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View Diary: Insider-Trading by a Top DeLay Staffer in Congress? (82 comments)

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  •  Day Trading (5+ / 0-)

    Dear Congresswoman Slaughter:

    I am a Series 24, licensed Principal and Series 4 licensed option trading principal. I have been a principal for 10 years and have been registered since 1987.

    There is already a prohibition from trading on non-public need not write new legislation in that regard as that is already well established law. If indeed the Capitol Staffers were trading ahead of public information then it is relatively easy to pursue a case against them. More than likely they would not have a broker per se but would be trading their own account online. Day trading as you refer to it requires a certain amount of cash equity to be in their account. If you make a certain number of trades without this amount in your account your account becomes restricted. It has been a while since I have dealt specifically with Day trading issues but I do believe that this is a Reg T requirement that was passed a few years back in the wake of the Day Trading bubble. Just gleaning some basic information from what you said, it does not appear that this gentleman would have been eligible for a Day Trading Account.

    That being said....every transaction is time stamped. It would be relatively easy to go back and look at certain trades as they relate to legislation pending in Congress. If those trades are going off in advance of the vote then one can make the case that the individual is trading on non-public information. While this might seem obvious it is not  as easy to prove as one might think. If found guilty   the individual is subject to disgorgement of profits and fines up to three times his profit in the trades. Also under the know your customer rule the brokerage firm might be held accountable as well.

    He who makes a beast of himself gets rid of the pain of being a man...Dr. Johnson (HST)

    by mikeypaw on Tue Mar 28, 2006 at 09:46:46 AM PST

      •  Thank You (2+ / 0-)
        Recommended by:
        SarahLee, Patricia Taylor

        But I am still puzzled as to what the Representative is referring too. I think, if I am understanding this right, the staffers are getting knowledge from the floor of the House that is technically public information but has yet to be widely disseminated. In other words they are getting the same knowledge that someone could get if they were sitting through the hearings and then calling those trades in from their seat in the House. In other words they are not getting non-public information which is clearly illegal no matter who you work for,they are getting better information by virtue of their proximity to the action. If that is the case then it is relatively easy to fix. Simply introduce a rule that all staffer and employees of govt. officials are prohibited from trading in accounts for some time period after a vote is taken in the in the House or Senate. This would not be dissimilar to the action taken by public companies to prohibit employees from buying or selling the stock of their company around the period of an earnings release.

        However the idea that we even have to have this discussion in the first place is just appalling. One would think that there would be plenty to do without trading stocks when you are supposed to be working for the public good.

        He who makes a beast of himself gets rid of the pain of being a man...Dr. Johnson (HST)

        by mikeypaw on Tue Mar 28, 2006 at 05:46:00 PM PST

        [ Parent ]

    •  Reg T tightening was for margin (0+ / 0-)

      Most brokers will balance a cash account on the fly, without holding for settlements and such.

      To claim secular societies are rejecting God, is to concede that religious societies are rejecting reality.

      by Kudos on Tue Mar 28, 2006 at 01:37:27 PM PST

      [ Parent ]

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