Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Insider trading, or the act of buying or selling investments based on non-public information, is

against the law in the United States and in most countries.

At its core, insider trading benefits well-connected investors at the expense of the general

public, and so it's been illegal in the United States since 1934, or at least for corporate

insiders.

I made a video a few months ago on the biggest insider trading scandals, and a lot of you

asked in the comments section, what about politicians?

Well, members of Congress have access to all sorts of price-relevant information about companies,

from colour on the progress of legislation to confidential information supplied in committee

hearings, to knowledge of the attitude of regulators towards a company or sector.

So it's kind of surprising that it wasn't until the 2012 passage of the Stock Act that American

politicians were legally prevented from insider trading.

Up until 2012, it was totally legal.

The Stock Act was passed in the wake of some controversies over stock trades around the

financial crisis of 2007-2008.

Its purpose was to stop members of Congress from using non-public information

derived from their official positions for personal benefit. Since 2012, no politicians

have been prosecuted under the Stock Act, which either means that the legislation is extremely

effective or entirely ineffective.

In March of last year, four US senators were accused of using insider information about the

coronavirus pandemic to profit in the stock market.

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