The debate over insider trading by members of Congress might divide them on the particulars, but Democratic Rep. William L. Owens and a likely Republican challenger in November, Matthew A. Doheny, are similar in at least some respects.
The two men — who both have interests in finance that they pledge don’t interfere with their duty to the public — say the practice must be stopped.
Mr. Owens and Mr. Doheny are supporting different bills that would address the matter. The man who wrote the book on insider trading among members of Congress doesn’t take sides in that debate.
“I think we should pass both of them,” said Peter F. Schweizer, a fellow at Stanford University’s Hoover Institution.
He wrote “Throw Them All Out,” a 2011 book that accused members of Congress of regularly using privileged information gleaned from their positions to line their own pockets. He also concluded that loopholes in the law essentially legalize what they’re doing, even though the average person would be thrown in jail for doing the same thing.
Insider trading is using non-public information to buy stocks. Part of the reason no member of Congress has ever been charged with insider trading stems from political considerations. The federal agency that enforces the rules — the Securities and Exchange Commission — gets its funding and its director approved by Congress, Mr. Schweizer said.
“Are they really going to be willing to go to war with the speaker of the House?” he said.
A “60 Minutes” special in which Mr. Schweizer was featured questioned whether two of the most immediate speakers of the House of Representatives John Boehner, a Republican of Ohio, and Nancy Pelosi, a Democrat of California — profited from insider knowledge.
The light that the piece generated prompted more than 200 members of the House of Representatives to sign on to the Stop Insider Trading on Congressional Knowledge Act. That includes Mr. Owens, D-Plattsburgh.
“I was not impressed with their actions,” Mr. Owens said of his reaction to the “60 Minutes” piece. “That said, if you have a husband and wife, one of them is a member of Congress, the other is an investor, you really have to know who made the decision, and was the information shared?”
The STOCK Act would explicitly bar members of Congress and their staff from divulging or trading on information they gleaned from pending or prospective legislation. The legislation would also require more financial disclosure of stock purchases — every 90 days, instead of the current cycle, which is once a year.
Mr. Owens said the law extends not only to legislative information, but any non-public information that a member of Congress or a staffer happened upon.
“I think that is the spirit and the intent of the law,” Mr. Owens said. “Any inside information you get, you would not be able to act on.”
Mr. Owens said he’s never personally witnessed insider trading. He also said he handles most of his investment decisions himself.
At the end of 2010, Mr. Owens invested in several energy stocks, including a $100,000 to $200,000 investment in Duke Energy Corp. and Southern Co.
He said he made his energy stock decisions based on a decidedly public source: the top circulation newspaper in the United States.
“I got the information from the Wall Street Journal,” Mr. Owens said. “I was looking for stocks that were high dividend-yielding stocks, and they were among the list of those published in the Journal.”
Mr. Doheny, Mr. Owens’s likely opponent, is also no stranger to the investment world. He worked as a portfolio manager at Deutsche Bank Securities and Fintech Advisory and now runs an investment firm, North Country Capital LLC. The company does deal in stocks, but not as much as his previous work, Mr. Doheny said. According to financial disclosure forms, North Country Capital is valued at between $1 million and $5 million, and he earned $15,000 to $50,000 in capital gains in 2011.
“Matt will either put North Country Capital into a blind trust or wind it down before he is sworn in as our next congressman,” Mr. Doheny’s spokesman, Jude R. Seymour, said in an email message.
While Mr. Doheny must report his personal investments, his company is not subject to those regulations.
“We will fully comply with all laws and House regulations,” Mr. Doheny said in an interview.
Mr. Doheny said the best way to stop insider trading is to write a law making it illegal for everyone, include members of Congress in that definition and then increase pressure on members of Congress by requiring even more aggressive disclosures.
“The first thing that is amazing to most people is that the U.S. House of Representatives never actually passed a law prohibiting insider trading,” said Mr. Doheny, who is conversant in the history and jargon of financial regulations. “It was all done by SEC rules.”
Mr. Doheny said the STOCK Act, as drafted, has holes. For example, he said, the language of the law that covers “pending legislation” doesn’t adequately cover the average activities of a member of Congress. Members of Congress also attend Cabinet-level briefings, meet with constituents and receive reports, for example, that may have nothing to do with pending legislation.
“I would not support this act because it’s flawed right now,” Mr. Doheny said. “Congress needs to expressly define insider trading and prohibit it. We need to remove any legal loophole, or, more importantly, any view that the American people have that there’s insider trading going on in the halls of Congress.”
Mr. Doheny instead supports the RESTRICT Act, authored by Republican Rep. Sean Duffy of Wisconsin. The Restore Ethical Standards, Transparency and Responsibility in Congressional Trading Act would give members of Congress two options: Disclose any trades you make three days after you make them, or turn all of your stocks over to a blind trust over which you have no control.
“The solution for me on this is transparency, transparency, transparency,” Mr. Schweizer said. “If you are required to electronically disclose your financial transactions within three business days, people in real time will see what sort of stock trades you’re making.”
And while the STOCK Act is a “step forward,” Mr. Schweizer said, the additional sunlight of the RESTRICT Act should come along with it.
“At the end of the day, you have the simple fact that laws that are enforced for the rest of us are not going to be enforced for Congress,” he said.