Fair trading rules take two big hits, on the negative side
Regulation Fair Disclosure, aka Reg FD, was initiated by the SEC and passed by Congress almost 13 years ago. While feeling somewhat overly restrictive at the time, the pluses outweighed the minuses and that has been the enforced law for determining insider trading or selective disclosure of material information in the securities markets.
There was one major loophole. The law explicitly did not apply to members of Congress, congressional employees, or any federal officials. As a simple example, if a member of the FDA or a congressional oversight panel of that agency, or member of Congress, learns that a new drug will be highly likely to pass its phase 3 approval trial, they could trade on that material information before it is public. The federal bureaucracy is obviously rife with financial decisions of who to hire to do what in Defense, Homeland Security, the list could go on forever. All of this information could be used to trade in the equity markets before it became public(ever wonder how most members of Congress retire with millions even if they came into the House as a small town country lawyer?).
With great fanfare, in early 2012 The Stock Act was passed in January 2012. That's the (Stop Trading on Congressional Knowledge Act of 2012). With no fanfare, that law was significantly gutted by Congress and signed by Obama on April 15th, just over a week ago. The rules still tacitly apply but with no teeth, meaning no penalties, and with only the requirement that such trades eventually be posted on the internet.
This is unconsciousnable and one more example of how corrupt our government employees and politicians, top down, really are. They are now once again unequivocally allowed legally protected insider trading.
That's the first major diminishment of fair disclosure in recent weeks. The second is the decision of the SEC to allow companies to use social media sites like Twitter and Facebook to broadcast market moving news. Reg FD required that material new information be forewarned as to timing and broadcast only in widely available media public news releases and public conference calls. To allow this is a stupid decision. However widespread these social media sites are, they by no means cover the universe of all investors, especially retail investors, certified financial planners, and smaller funds without a staff large enough to monitor these sites.
It gives a site like Twitter much greater clout, as automatically programmed trading platforms will be more inclined to react to whatever comes across, from anyone. Volatility could be increased exponentially.
Who is running this government that we have and accepting the financial responsibities that entails for the investing public??? A good guess is our "esteemed" Congress. An aloof ever compromising President and a new Treasury Secretary eager to build relationships provided little barrier to these changes.
There was one major loophole. The law explicitly did not apply to members of Congress, congressional employees, or any federal officials. As a simple example, if a member of the FDA or a congressional oversight panel of that agency, or member of Congress, learns that a new drug will be highly likely to pass its phase 3 approval trial, they could trade on that material information before it is public. The federal bureaucracy is obviously rife with financial decisions of who to hire to do what in Defense, Homeland Security, the list could go on forever. All of this information could be used to trade in the equity markets before it became public(ever wonder how most members of Congress retire with millions even if they came into the House as a small town country lawyer?).
With great fanfare, in early 2012 The Stock Act was passed in January 2012. That's the (Stop Trading on Congressional Knowledge Act of 2012). With no fanfare, that law was significantly gutted by Congress and signed by Obama on April 15th, just over a week ago. The rules still tacitly apply but with no teeth, meaning no penalties, and with only the requirement that such trades eventually be posted on the internet.
This is unconsciousnable and one more example of how corrupt our government employees and politicians, top down, really are. They are now once again unequivocally allowed legally protected insider trading.
That's the first major diminishment of fair disclosure in recent weeks. The second is the decision of the SEC to allow companies to use social media sites like Twitter and Facebook to broadcast market moving news. Reg FD required that material new information be forewarned as to timing and broadcast only in widely available media public news releases and public conference calls. To allow this is a stupid decision. However widespread these social media sites are, they by no means cover the universe of all investors, especially retail investors, certified financial planners, and smaller funds without a staff large enough to monitor these sites.
It gives a site like Twitter much greater clout, as automatically programmed trading platforms will be more inclined to react to whatever comes across, from anyone. Volatility could be increased exponentially.
Who is running this government that we have and accepting the financial responsibities that entails for the investing public??? A good guess is our "esteemed" Congress. An aloof ever compromising President and a new Treasury Secretary eager to build relationships provided little barrier to these changes.
posted by John Borden at 11:09 AM
5 Comments:
Thanks, John. I didn't know much of this. Guess I better take up tweeting.
Yeah, that's an idea. Keep your ODU magazine going and highlight your built in circulation, include a few advertisements for selling ODU t-shirts and memorabilia, and then IPO it. As the IPO passes its quiet phase, tweet that George Soros was a major buyer.
For authorities, I should note that this is a joke.
Now I know why so many Republicans were running for President.
As a matter of course, President's put their assets into blind trusts, but that aside, all of their cabinet appointees and myriad others, including members of Congress will benefit from the opportunity for insider trading, after a 15 month hiatus before being essentially annulled. This has been a long standing practice long before Reg FD, long standing meaning anytime in recent memory. A phase 3 approval for a drug at a mid-cap biotech could double the price in a day, nice day for Fed employees who do the "legal" insider trading a few days or even a day before the public disclosure.
As a matter of course, President's put their asset into blind trusts, but that aside all of their cabinet appointees and myriad others, including members of Congress benefit from the opportunity for insider trading. This has been a long standing practice well before RegFD. A phase 3 approval for a drug at a mid-cap biotech could double the price in a day, a nice payday for many Federal employees after the public disclosure.
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