Congress and Insider Trading: Breaking the Law and Making the Law

Abstract

This descriptive case study concerns the insider trading prosecution against former U.S. Representative Chris Collins, which resulted in his guilty plea in 2018, incarceration, and then release in December 2020, after receiving a pardon by outgoing president Donald Trump. It uses that case’s unique facts as a launching point and thematic device for summarizing illegal insider trading law, while emphasizing the difficulty in recognizing that insider trading law requires first that the wrongful trader have—and violate— a fiduciary duty. This is done by noting the influence federal case law has had on determining what insider trading is. The case study then continues the congressional line of analysis by focusing on the 2012 STOCK Act, which prohibits Congress from profiting off their access to inside information, as well as the Insider Trading Prohibition Act, current legislation that might become America’s first, criminal insider trading statute.