ATLANTA -- On Wall Street and in corporate America, insider trading is not only frowned upon, it's illegal. But, as a Georgia State University professor discovered some of our elected officials may be making investment decisions based on information normal American's don't have access to.
Privilege and access are just some of the perks afforded to America's elected officials and according to Dr. Alan Ziobrowski, a business professor at Georgia State University, access to information may be helping congressmen boost their investment portfolios.
Ziobrowski has studied the stock transactions of members of congress. What he has found may surprise you.
"They had earned extraordinary returns," Ziobrowski said during a phone interview Friday. "They earned typically about one percent more than the average investor every month. They made about 12 percent more a year than the average investor. That is what we call statistically significant, suggesting that they were trading on information that the rest of us didn't have."
It's all legal. Technically, you can't call this "insider trading" because legislators are not inside the company or corporation. Because of that, they're exempt from regulations that prevent insider trading.
But, Ziobrowski contents they may be even farther ahead of the market than insiders. "They may know they're going to make a massive, for example, purchase of a company's products, defense weapons, whatever, before the company is even aware of that," he said. "So, in reality, they do have information that even insiders may not have."
Ziobrowski's research was published in 2004 but it's getting new attention now that a bill has been proposed in Congress. That bill, called the Stop Trading On Congressional Knowledge (STOCK) Act, would prohibit members or employees of Congress from buying or selling investments based on non-public information.
"It won't stop them from doing what they're doing now, but it will slow them down," Ziobrowski said. "I'd like to know the next day what things they buy, not three months down the road. Because if I know what they're buying the next day, I may not be able to stop them from buying it, but I may be able to mimic what they're doing."
The STOCK Act was introduced by Brian Baird, from the state of Washington. It has six co-sponsors.
Ziobrowski recently testified on Capitol Hill about his study as it relates to the STOCK Act. But he acknowledges that passing the bill may be an uphill battle. "I know that it's not real popular legislation in Congress. But I also know that Chairman Barney Frank is allowing the hearings to proceed forward, which means that he is giving it some support. So, it's a little bit difficult to tell," he said.
