Professor Bainbridge is urging his readers to pressure Eric Cantor into dropping his opposition to pending legislation that would ban Congressional insider trading. But before you Twitter Cantor, please read Todd Henderson and my Politico column, in which we make the following point, among others:
A prohibition on trading would be impossible to enforce because congressmembers have so many opportunities to use information without trading on it. They could trade tips or exchange them for political favors. Given the pervasiveness of political events, the Securities and Exchange Commission would face an impossible task of identifying the trading from market movements — its usual tool for tracking insider trading.
If the SEC did try to enforce the ban, it could chill legitimate information flows on Capitol Hill and create a powerful tool for political parties to deploy against their enemies. Moreover, the SEC itself would be exposed to accusations of political favoritism — which could undermine its market-policing role. Conflict-of-interest allegations, like those during the Madoff investigation, would become routine.
The SEC is already embroiled in more politics than you want a market regulator to be. Does it really need to start regulating Congress? I think this Act needs more thought and less Twittering.