5 ms·

Members of congress should only be allowed to invest in SPY/VOO, VTI, and a few other broad ETFs, long only, no options.

prussian 5y ago
Honestly, this should be held for any positions where insider information is clearly a conflict. Maybe not in specific instruments, but investments should be made through a third-party money manager.
beervirus 5y ago
That would be a good start. But it's still problematic for them to sell positions like that on non-public information like news of a new pandemic.
- finexplained 5y ago
  I agree, it's a start. But importantly it (attempts to) align their interests with the broader US economy. Also it still allows them to invest for their personal futures, which I believe is a right.
ralusek 5y ago
Hasn't the last year very clearly demonstrated that the ability to lower interest rates and print money has had far more of an impact on the market than anything else? Stocks are practically moving up and down in unison, the market is almost entirely macroeconomics driven when 40% of all USD was created in the last 12 months. If they can invest in total market indices while having the ability to control the money supply, even if they can just go long, it doesn't matter.
BrianOnHN 5y ago
Sounds like overreaching blanket regulation. What if we just regulated the 0.01% who's wealth is such that it makes the top elected officials in our country have a seemingly insignificant compensation.
elliekelly 5y ago
This is more or less what everyone in the registered investment adviser & mutual fund world must do. There’s quite a lot of compliance software to facilitate approval and checks before and after a transaction is effected in a personal account and the personal transaction history is compared, broadly, with market performance and internal fund transactions periodically to check for overlapping trades (+/- a week) in the same direction.
- slaymaker1907 5y ago
  I had to follow these ridiculous rules despite the fact that I never actually had access to PII and was working as programmer at Goldman Sachs (in PWM, no robo trading or anything). These rules seem to be in place mostly for (relatively) poor people.
throwawayboise 5y ago
My thought was that they (and immediate family) would have to put their assets into a blind trust could be disolved upon their leaving office. They should have no ability to make personal investment decisions while they are in a position of such influence and insider knowledge.
de6u99er 5y ago
What about their friends and families?
- finexplained 5y ago
  In the financial industry we have restrictions not only on our own trading accounts, but on any account that we might have reasonable influence over. In my particular case, this means both my brokerage accounts and any of those belonging to a spouse. This is a requirement by our compliance departments to follow SEC regulations regarding insider trading. I don't see why similar rules would not be applied in this setting.
  - de6u99er 5y ago
    Sure, but ultimately it's only a crime if they get caught. And even then it seems to me that they can get away with it too easily. How about electing honest people, instead of constantly voting for the establishement (w. a few exceptions).
    - finexplained 5y ago
      I'm obviously for electing honest people. It's probably (I don't work at the SEC) true that it's still difficult to catch all perpetrators. The SEC has limited resources and they probably have a way of prioritizing cases that they think have sufficient evidence. No system is perfect, but from my perspective the SEC is a respected organization whose authority is treated seriously. I have frequently been told that I will face serious jail time if I engage in insider trading and am later caught.
    - mLuby 5y ago
      (If you know a way to reliably detect "honest" people, it'll make you enough money to stop caring about all this and probably win you a Nobel peace prize too.) How to detect these crimes? By doing what the article describes: analyze the public officials' public disclosures and performance to see if "House members are outperforming market averages" or "house members followed trends far earlier" than the rest of the market. I would extend this analysis to family and known associates as well; if the politician's neighbor starts making really smart trades around the time the politician entered office, that's worth investigating. I wonder about allowing any constituent to bring a suit against their politician if they believe they can prove insider trading. Judge/grand jury still has to rule (publicly!) that it's case-worthy before bothering the politician. If the politician loses the case, they're removed from office, must cover all legal fees, and must give the ill-gotten gains to the constituent who brought the suit as a bounty. If the suit fails, that suing constituent has to cover the legal fees. We could also require (and might already for all I know) a written justification at time of each trade, which TV suggests is a thing hedge funds have to do, but that's basically just a fixed transaction cost since anyone with money could hire an "analyst" to write something plausible. Another comment suggested that officials should have to announce trades in advance, though that might have the effect of banning trades altogether. Fundamentally, I want my elected officials focused 100% on doing their job, not trying to get rich in their spare time. So barring them from all trading while in office would be fine by me.
rsync 5y ago
"... long only ..." Can we please stop perpetuating the myth that short selling, or holding short positions, is some kind of exotic or shady or villainous activity ? It's not. Short selling, and the holding of short positions, is value neutral and is part of a healthy properly functioning marketplace. I don't know what politicians should or should not be doing but a long vs. short distinction is silly.
- finexplained 5y ago
  My apologies, it wasn't my intent to imply that myth. I actually completely agree with your position on short selling. At the time of writing it just seemed a bit weird to me, and possibly an incorrect alignment of interests, for a US politician to take a short position in SPY...
  - rsync 5y ago
    OK, actually that's interesting - if they are restricted to SPY (for instance) then it would, indeed, be a bad look if they went short ...
throwastrike 5y ago
Exactly. If you work for a bank, you can’t buy certain stocks. Some firms will limit you to ETFs and indices. Why can’t we apply simple private sector rules? Politicians, both republican and democrats, are crooks. I don’t think you can contest that outside perhaps a handful of public servants.

prussian 5y ago

Honestly, this should be held for any positions where insider information is clearly a conflict. Maybe not in specific instruments, but investments should be made through a third-party money manager.

beervirus 5y ago

That would be a good start. But it's still problematic for them to sell positions like that on non-public information like news of a new pandemic.

finexplained 5y ago
I agree, it's a start. But importantly it (attempts to) align their interests with the broader US economy. Also it still allows them to invest for their personal futures, which I believe is a right.

ralusek 5y ago

Hasn't the last year very clearly demonstrated that the ability to lower interest rates and print money has had far more of an impact on the market than anything else? Stocks are practically moving up and down in unison, the market is almost entirely macroeconomics driven when 40% of all USD was created in the last 12 months. If they can invest in total market indices while having the ability to control the money supply, even if they can just go long, it doesn't matter.

BrianOnHN 5y ago

Sounds like overreaching blanket regulation. What if we just regulated the 0.01% who's wealth is such that it makes the top elected officials in our country have a seemingly insignificant compensation.

elliekelly 5y ago

This is more or less what everyone in the registered investment adviser & mutual fund world must do. There’s quite a lot of compliance software to facilitate approval and checks before and after a transaction is effected in a personal account and the personal transaction history is compared, broadly, with market performance and internal fund transactions periodically to check for overlapping trades (+/- a week) in the same direction.

slaymaker1907 5y ago
I had to follow these ridiculous rules despite the fact that I never actually had access to PII and was working as programmer at Goldman Sachs (in PWM, no robo trading or anything). These rules seem to be in place mostly for (relatively) poor people.

throwawayboise 5y ago

My thought was that they (and immediate family) would have to put their assets into a blind trust could be disolved upon their leaving office. They should have no ability to make personal investment decisions while they are in a position of such influence and insider knowledge.

de6u99er 5y ago

What about their friends and families?

finexplained 5y ago
In the financial industry we have restrictions not only on our own trading accounts, but on any account that we might have reasonable influence over. In my particular case, this means both my brokerage accounts and any of those belonging to a spouse. This is a requirement by our compliance departments to follow SEC regulations regarding insider trading. I don't see why similar rules would not be applied in this setting.
- de6u99er 5y ago
  Sure, but ultimately it's only a crime if they get caught. And even then it seems to me that they can get away with it too easily. How about electing honest people, instead of constantly voting for the establishement (w. a few exceptions).
  - finexplained 5y ago
    I'm obviously for electing honest people. It's probably (I don't work at the SEC) true that it's still difficult to catch all perpetrators. The SEC has limited resources and they probably have a way of prioritizing cases that they think have sufficient evidence. No system is perfect, but from my perspective the SEC is a respected organization whose authority is treated seriously. I have frequently been told that I will face serious jail time if I engage in insider trading and am later caught.
  - mLuby 5y ago
    (If you know a way to reliably detect "honest" people, it'll make you enough money to stop caring about all this and probably win you a Nobel peace prize too.) How to detect these crimes? By doing what the article describes: analyze the public officials' public disclosures and performance to see if "House members are outperforming market averages" or "house members followed trends far earlier" than the rest of the market. I would extend this analysis to family and known associates as well; if the politician's neighbor starts making really smart trades around the time the politician entered office, that's worth investigating. I wonder about allowing any constituent to bring a suit against their politician if they believe they can prove insider trading. Judge/grand jury still has to rule (publicly!) that it's case-worthy before bothering the politician. If the politician loses the case, they're removed from office, must cover all legal fees, and must give the ill-gotten gains to the constituent who brought the suit as a bounty. If the suit fails, that suing constituent has to cover the legal fees. We could also require (and might already for all I know) a written justification at time of each trade, which TV suggests is a thing hedge funds have to do, but that's basically just a fixed transaction cost since anyone with money could hire an "analyst" to write something plausible. Another comment suggested that officials should have to announce trades in advance, though that might have the effect of banning trades altogether. Fundamentally, I want my elected officials focused 100% on doing their job, not trying to get rich in their spare time. So barring them from all trading while in office would be fine by me.

rsync 5y ago

"... long only ..." Can we please stop perpetuating the myth that short selling, or holding short positions, is some kind of exotic or shady or villainous activity ? It's not. Short selling, and the holding of short positions, is value neutral and is part of a healthy properly functioning marketplace. I don't know what politicians should or should not be doing but a long vs. short distinction is silly.

finexplained 5y ago
My apologies, it wasn't my intent to imply that myth. I actually completely agree with your position on short selling. At the time of writing it just seemed a bit weird to me, and possibly an incorrect alignment of interests, for a US politician to take a short position in SPY...
- rsync 5y ago
  OK, actually that's interesting - if they are restricted to SPY (for instance) then it would, indeed, be a bad look if they went short ...

throwastrike 5y ago

Exactly. If you work for a bank, you can’t buy certain stocks. Some firms will limit you to ETFs and indices. Why can’t we apply simple private sector rules? Politicians, both republican and democrats, are crooks. I don’t think you can contest that outside perhaps a handful of public servants.