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![handle is hein.journals/gljon111 and id is 1 raw text is:
Time for a Broad Prophylactic Against Congressional
Insider Trading
JOHN P. ANDERSON*
INTRODUCTION
In 2011, Peter Schweizer published a book, Throw Them All Out, in
which he exposes some questionable means by which politicians manage to
increase their personal wealth fifty percent faster than the average American.1
Schweizer suggests that trading on material nonpublic information is one
method by which congresspersons achieve outsized returns on their
investments.2 He cites one study finding that, while the average American
investor underperforms the market when trading in individual stocks, [t]he
average senator beats the market by 12% a year.3 This statistic is concerning
on its own, but it is downright disturbing when considered alongside the same
study's finding that corporate insiders and hedge funds (the usual targets of
most insider trading complaints) beat the market on average by about only
seven percent.4
Schweitzer's book was followed by a feature story on the CBS News
show, 60 Minutes, highlighting some dubious stock trades by leaders of both
political parties.5 These stories got the public's attention and spurred
Congress to act, adopting the Stop Trading on Congressional Knowledge
(STOCK) Act in April of 2012.6
The STOCK Act made explicit what many already regarded as implicit
that congressional trading based on material nonpublic information acquired
by virtue of their positions as public servants is a breach of their fiduciary
duties and therefore constitutes insider trading in violation of the general anti-
fraud provisions of Section lOb of the Securities Exchange Act of 1934.'
* J. Will Young Professor of Law, Mississippi College School of Law; University of
Virginia School of Law, J.D.; University of Virginia, Ph.D. (Philosophy).
1PETER SCHWEIZER, THROW THEM ALL OUT xvii (2011).
2 See id. at xvii, xviii.
3 Id. at xviii.
4 Id.
s See, e.g., John Bresnahan, '60 Minutes' on 'Honest Graft', POLITICO (Nov. 13, 2011),
https://www.politico.com/story/2011/ 11/60-minutes-on-honest-graft-068271
[https://penna.cc/D6SD-UDE6].
6 15 U.S.C. § 78u-1.
? See id. § 78u-1(g)(1).](ViewImageLocal?handle=hein.journals/gljon111&div=1&collection=&method=preview&ext=.png&size=3)