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Ken Turchi
IU Maurer School of Law

Last modified: Tuesday, January 31, 2012

Congressional insider trading bill eliminates gray area, says IU Maurer School of Law expert

Jan. 31, 2012

BLOOMINGTON, Ind. -- The U.S. Senate voted 93-2 late Monday to begin debate on the Stop Trading on Congressional Knowledge Act , also known as the STOCK Act. According to an Indiana University Maurer School of Law professor who testified last month in both houses of Congress, the STOCK Act would eliminate what many regard as an uncharted gray area in existing law.

"I'm hopeful that the Senate's bill will be passed by the end of this week and sent over to the House," said professor Donna M. Nagy. "Questions surrounding the scope of Congress' obligations under the federal securities laws warrant clear and unambiguous answers -- and the Senate's STOCK Act accomplishes that tremendously important goal."

The Senate bill, which was substantially revised following a Dec. 1 hearing before the Committee on Homeland Security and Governmental Affairs, makes unmistakably clear that the insider trading prohibitions arising under the federal securities laws apply to members of Congress and congressional employees. It therefore eliminates any doubt that members of Congress and their staffs are prohibited from purchasing or selling securities on the basis of material nonpublic information gained through their congressional service -- or from misusing that information to tip others who trade.

"Beyond that," Nagy added, "the bill creates an effective system of transparency by requiring members of Congress to report securities purchases or sales within 30 days of the transaction."

Introduced by Sen. Kirsten Gillibrand, D-N.Y., and Sen. Scott Brown, R-Mass., the bill quickly gained momentum last week after President Barack Obama called for its passage in his State of the Union address.

Following her testimony before the Senate committee, Nagy returned to Washington on Dec. 6 to testify before the House Committee on Financial Services. Since then, she has been interviewed on the STOCK Act by several media sources, including an appearance on NPR's "The Diane Rehm Show."

Nagy is the C. Ben Dutton Professor of Law at the IU Maurer School of Law. She is available to comment on the STOCK Act and can be reached at 812-856-2826 or